8-KMaterial AgreementsSecurities & ListingShareholder Matters+2

AMERICAN INTERNATIONAL GROUP, INC. 8-K Report, Material Agreement (Jan 14, 2011)

Filed January 14, 2011For Securities:AIG

Summary

American International Group, Inc. (AIG) has completed a significant recapitalization transaction on January 14, 2011, marking a major step towards reducing its reliance on government support. This transaction involved the full repayment of the $21 billion credit facility with the Federal Reserve Bank of New York (FRBNY) using proceeds from the sales of AIA Group Limited (AIA) and American Life Insurance Company (ALICO). These funds were channeled through Special Purpose Vehicles (SPVs) via intercompany loans, secured by pledges of various AIG assets, including interests in Nan Shan, AIG Star, AIG Edison, and ILFC, along with remaining AIA shares and MetLife securities. Furthermore, AIG repurchased preferred interests in the SPVs from the FRBNY using a $20 billion drawdown from the U.S. Treasury Department's commitment under the Series F Securities Purchase Agreement. These repurchased interests were then exchanged with the Treasury for AIG's Series F preferred stock. A new Series G preferred stock was issued to the Treasury, and existing Series C, E, and F preferred stock held by the Trust and the Treasury were exchanged for a substantial amount of AIG common stock. This exchange has resulted in the U.S. Treasury holding approximately 92% of AIG's outstanding common stock, signifying a profound shift in control.

Key Highlights

  • 1AIG fully repaid its $21 billion credit facility with the FRBNY, terminating the agreement.
  • 2Proceeds from the AIA IPO and ALICO sale were used to fund the FRBNY repayment via SPV intercompany loans.
  • 3The U.S. Treasury Department provided approximately $20 billion via a drawdown from its Series F commitment.
  • 4AIG issued 20,000 shares of Series G Cumulative Mandatory Convertible Preferred Stock to the Treasury.
  • 5Existing Series C, E, and F preferred stock held by the Trust and Treasury were exchanged for approximately 1.655 billion shares of AIG Common Stock.
  • 6The U.S. Treasury Department now holds approximately 92% of AIG's outstanding common stock, indicating a change in control.
  • 7AIG also satisfied conditions for new credit facilities, including a $1.5 billion Three-Year Credit Agreement and a $1.5 billion 364-Day Credit Agreement.

Frequently Asked Questions

The primary purpose is to complete a significant recapitalization of AIG. This involves repaying AIG's debt to the FRBNY, restructuring its preferred stock holdings with the U.S. Treasury, and ultimately reducing AIG's reliance on government financial support.

AIG repaid approximately $21 billion to the FRBNY. The funds primarily came from the net proceeds of AIG's sale of AIA Group Limited (AIA) in its IPO and the sale of American Life Insurance Company (ALICO). These proceeds were channeled through Special Purpose Vehicles (SPVs) as intercompany loans to AIG.

Following the exchange of preferred stock for common stock, the U.S. Treasury Department now holds approximately 92% of AIG's outstanding common stock. This substantial ownership indicates a change in control of AIG and highlights the significant government investment and oversight.

AIG issued 20,000 shares of Series G Cumulative Mandatory Convertible Preferred Stock to the Treasury Department. This stock has preferential dividend and liquidation rights over common stockholders, and importantly, requires the Treasury's consent for AIG to pay dividends on common stock or repurchase shares, effectively giving the Treasury significant control over capital allocation decisions related to common shareholders.