AIG 2011 Annual Report Download - page 139

are more fully described in Note 1 to the Consolidated Financial Statements and are excluded from the Sources of
Liquidity and Uses of Liquidity discussions below.
In addition, in 2011, several significant asset sales were completed, including the sale of AIG Star and AIG
Edison in February 2011, the sale of the MetLife securities in March 2011, and the sale of Nan Shan in August
2011. Proceeds from these sales primarily were used to pay down the Department of the Treasury’s SPV Preferred
Interests. These transactions are more fully described in Notes 1 and 4 to the Consolidated Financial Statements
and are excluded from the Sources of Liquidity and Uses of Liquidity discussion below.
In May 2011, AIG and the Department of the Treasury, as selling shareholder, completed a registered public
offering of AIG Common Stock. AIG issued and sold 100 million shares of AIG Common Stock for aggregate net
proceeds of approximately $2.9 billion and the Department of the Treasury sold 200 million shares of AIG
Common Stock. AIG did not receive any of the proceeds from the sale of the shares of AIG Common Stock by
the Department of the Treasury. A portion of the net proceeds AIG received from the offering, $550 million has
been used to fund a litigation settlement, and AIG used the balance of the net proceeds for general corporate
purposes.
AIG issues debt securities in the public, private and non-U.S. markets from time to time to meet its financing
needs and those of certain of its subsidiaries. AIG engages in secured and unsecured borrowings to support its
capital structure, corporate needs and the operations of subsidiaries. Liquidity sources of AIG and its respective
subsidiaries are utilized to fund repayment of these obligations, including any additional funding requirements
where cash flows from assets supporting borrowing obligations are not sufficient.
On September 13, 2011, AIG raised approximately $2.0 billion in proceeds from the issuance of senior
unsecured notes, consisting of $1.2 billion in three-year notes and $800 million in five-year notes. AIG is using the
proceeds from the sale of these notes to pay maturing notes that were issued by AIG to fund the MIP.
On October 12, 2011, the previously outstanding AIG 364-Day Syndicated Facility, AIG 3-Year Syndicated
Facility and Chartis letter of credit facility were terminated and AIG entered into a $1.5 billion 364-Day
Syndicated Facility and a $3.0 billion 4-Year Syndicated Facility. The new 4-Year Syndicated Facility provides for
$3.0 billion of revolving loans, which includes a $1.5 billion letter of credit sublimit. The $1.3 billion of previously
issued letters of credit under the Chartis letter of credit facility were rolled into the letter of credit sublimit within
the 4-Year Syndicated Facility, so that a total of $1.7 billion remains available under this facility, of which
$0.2 billion is available for letters of credit. AIG expects that it may draw down on these facilities from time to
time, and may use the proceeds for general corporate purposes.
In October 2011, AIG entered into a contingent liquidity facility under which AIG has the right, for a period of
one year, to enter into put option agreements, with an aggregate notional amount of up to $500 million, with an
unaffiliated international financial institution pursuant to which AIG has the right, for a period of five years from
the date any such put option agreement is entered into, to issue up to $500 million in senior debt to the financial
institution, at AIG’s discretion.
In November 2011, AIG exchanged specified series of its outstanding Junior Subordinated Debentures for newly
issued senior notes pursuant to an exchange offer. In particular, AIG exchanged (i) $312 million aggregate
principal amount of its outstanding Series A-1 Junior Subordinated Debentures for $256 million aggregate
principal amount of its new 6.820 percent Dollar notes due November 15, 2037, (ii) £812 million ($1.3 billion at
the December 31, 2011 exchange rate) aggregate principal amount of its outstanding Series A-2 and
Series A-8 Junior Subordinated Debentures for £662 million ($1.0 billion at the December 31, 2011 exchange rate)
aggregate principal amount of its new 6.765 percent Sterling notes due November 15, 2017 and (iii) A591 million
($766 million at the December 31, 2011 exchange rate) aggregate principal amount of its outstanding
Series A-3 Junior Subordinated Debentures for A421 million ($545 million at the December 31, 2011 exchange
rate) aggregate principal amount of its new 6.797 percent Euro notes due November 15, 2017. The exchange
resulted in a pre-tax gain on extinguishment of debt of approximately $484 million, which is reflected in Net loss
on extinguishment of debt in the Consolidated Statement of Operations and a deferred gain of $65 million, which
will be amortized as a decrease in interest expense, and is reflected in Other long-term debt in the Consolidated
Balance Sheet.
AIG 2011 Form 10-K 125