8-KMaterial AgreementsExhibits & Filings

AMERICAN INTERNATIONAL GROUP, INC. 8-K Report, Material Agreement (Dec 27, 2010)

Filed December 27, 2010For Securities:AIG

Summary

On December 23, 2010, American International Group, Inc. (AIG) entered into significant new credit agreements totaling $3.0 billion in new credit facilities and a $1.3 billion Letter of Credit Agreement for its subsidiary, Chartis. These agreements are contingent upon AIG satisfying certain conditions by March 31, 2011, notably the repayment and termination of its existing credit facility with the Federal Reserve Bank of New York (FRBNY). The new credit arrangements signal a strategic move by AIG to replace its FRBNY debt with more conventional private sector financing. The success of this transition is crucial for AIG's financial stability and operational flexibility, as the effectiveness of these new agreements is directly tied to the successful unwinding of its government-backed obligations.

Key Highlights

  • 1AIG entered into a $1.5 billion Three-Year Credit Agreement and a $1.5 billion 364-Day Credit Agreement, totaling $3 billion in new credit facilities.
  • 2AIG's subsidiary, Chartis, Inc., entered into a $1.3 billion Letter of Credit and Reimbursement Agreement.
  • 3The effectiveness of these new agreements is conditional on AIG repaying all amounts owed and terminating its Credit Agreement with the Federal Reserve Bank of New York (FRBNY) by March 31, 2011.
  • 4The new agreements impose financial covenants, including minimum net worth requirements for AIG and minimum statutory surplus for Chartis, along with debt limitations for AIG.
  • 5Customary affirmative and negative covenants are included, restricting indebtedness, liens, dispositions, restrictive agreements, and affiliate transactions.
  • 6Amounts due under the new agreements may be accelerated upon an event of default, such as non-payment or breach of covenants, with potential cure periods.

Frequently Asked Questions

The primary purpose is to replace AIG's existing credit facility with the Federal Reserve Bank of New York (FRBNY) with new credit lines from private sector lenders. This transition is a key step for AIG to deleverage and regain financial flexibility.

AIG must satisfy certain conditions by March 31, 2011, most importantly, repaying all outstanding amounts under its FRBNY Credit Facility and terminating that agreement, which includes the release of related liens.

The agreements require AIG to maintain a specified minimum net worth and limit its total debt. Chartis must maintain a minimum statutory surplus. These are crucial financial health indicators that lenders will monitor.

AIG is securing a total of $3.0 billion through two credit agreements: a $1.5 billion three-year facility and a $1.5 billion 364-day facility. Its subsidiary, Chartis, is securing a separate $1.3 billion Letter of Credit and Reimbursement Agreement, which likely supports its insurance operations.