American International Group, Inc. (AIG) today announced that it has
signed a definitive agreement with the Federal Reserve Bank of New York
for a two-year, $85 billion revolving credit facility. Interest will
accrue at a rate based on 3-month LIBOR plus 8.50%. The facility
provides for an initial gross commitment fee of 2% of the total facility
on the closing date. AIG will also pay a commitment fee on undrawn
amounts at the rate of 8.50% per annum. Interest and the commitment fees
are generally payable through an increase in the outstanding balance
under the facility.
AIG is required to repay the facility from, among other things, the
proceeds of certain asset sales and issuances of debt or equity
securities. These mandatory repayments permanently
reduce the amount available to be borrowed under the facility.
Under the agreement, AIG will issue a new series of Convertible
Participating Serial Preferred Stock to a trust that will hold the
Preferred Stock for the benefit of the United States Treasury. The
Preferred Stock will be entitled to participate in any dividends paid on
the common stock, with the payments attributable to the Preferred Stock
being approximately, but not in excess of, 79.9% of the aggregate
dividends paid. The Preferred Stock will vote with the common stock on
all matters, and will hold approximately, but not in excess of, 79.9% of
the aggregate voting power. The Preferred Stock will be convertible into
common stock following a special shareholders meeting to amend AIG’s
restated certificate of incorporation.
Borrowings under the facility are conditioned on the Federal Reserve
Bank of New York being reasonably satisfied with, among other things, AIG’s
corporate governance. The facility contains customary affirmative and
negative covenants, including a requirement to maintain a minimum amount
of liquidity and a requirement to use reasonable efforts to cause the
composition of the Board of Directors of AIG to be satisfactory to the
trust holding the Preferred Stock within 10 days after the establishment
of the trust.
AIG Chairman and Chief Executive Officer Edward M. Liddy said, “AIG
made an exhaustive effort to address its liquidity needs through private
sector financing, but was unable to do so in the current environment.
This facility was the company’s best
alternative. We are pleased to have finalized the terms of the facility,
and are already developing a plan to sell assets, repay the facility and
emerge as a smaller but profitable company. Importantly, AIG’s
insurance subsidiaries remain strong, liquid and well-capitalized.”
The facility will be secured by a pledge of the capital stock and assets
of certain of AIG’s subsidiaries, subject to
exclusions for certain property the pledge of which is not permitted by
AIG debt instruments, as well as exclusions of assets of regulated
subsidiaries, assets of foreign subsidiaries and assets of special
purpose vehicles.
It should be noted that the remarks made in this press release may
contain projections concerning financial information and statements
concerning future economic performance and events, plans and objectives
relating to management, operations, products and services, and
assumptions underlying these projections and statements. It is possible
that AIG's actual results and financial condition may differ, possibly
materially, from the anticipated results and financial condition
indicated in these projections and statements. Factors that could cause
AIG's actual results to differ, possibly materially, from those in the
specific projections and statements are discussed in Item 1A. Risk
Factors of AIG's Annual Report on Form 10-K for the year ended December
31, 2007, and in Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations of AIG's Quarterly Report
on Form 10-Q for the period ended June 30, 2008. AIG is not under any
obligation (and expressly disclaims any such obligations) to update or
alter its projections and other statements whether as a result of new
information, future events or otherwise.
American International Group, Inc. (AIG), a world leader in insurance
and financial services, is the leading international insurance
organization with operations in more than 130 countries and
jurisdictions. AIG companies serve commercial, institutional and
individual customers through the most extensive worldwide
property-casualty and life insurance networks of any insurer. In
addition, AIG companies are leading providers of retirement services,
financial services and asset management around the world. AIG’s
common stock is listed on the New York Stock Exchange, as well as the
stock exchanges in Ireland and Tokyo.
American International Group, Inc.
Charlene Hamrah (Investment
Community)
212-770-7074
or
Nicholas Ashooh (News Media)
212-770-3523
