AIG 2011 Annual Report Download - page 143

Aircraft Leasing
ILFC’s sources of liquidity include existing cash and short-term investments of $2.0 billion, future cash flows
from operations, debt issuances, and aircraft sales, subject to market and other conditions. Uses of liquidity for
ILFC primarily consist of aircraft purchases and debt repayments. In 2011, ILFC improved its liquidity position by
entering into an unsecured $2.0 billion three-year revolving credit facility and a secured $1.5 billion term loan
facility. In addition, on May 24, 2011, ILFC issued $2.25 billion aggregate principal amount of senior unsecured
notes, with $1.0 billion maturing in 2016 and $1.25 billion maturing in 2019. On June 17, 2011, ILFC completed
tender offers for the purchase of approximately $1.67 billion aggregate principal amount of notes with maturity
dates in 2012 and 2013 for total cash consideration, including accrued interest, of approximately $1.75 billion.
ILFC recorded a $61 million loss on the extinguishment of debt during the second quarter of 2011. On
December 22, 2011, ILFC issued $650 million aggregate principal amount of senior unsecured notes maturing in
2022. On February 6, 2012, ILFC announced that it intends to raise a new senior secured term loan of
$900 million, with the proceeds to be used to repay a portion of its outstanding debt and related interest expense
and for general corporate purposes. The senior secured term loan will be secured primarily by a first priority
perfected lien on the equity of certain ILFC subsidiaries that directly or indirectly own a pool of aircraft and
related leases.
See Debt herein and Note 15 to the Consolidated Financial Statements for further details on ILFC’s revolving
credit facilities and outstanding debt.
Other Operations
Mortgage Guaranty
AIG currently expects that its UGC subsidiaries will be able to continue to satisfy future liquidity requirements
and meet their obligations, including requirements arising out of reasonably foreseeable contingencies or events,
through cash from operations and, to the extent necessary, asset dispositions. UGC subsidiaries maintain
substantial liquidity in the form of cash and short-term investments, totaling $1.1 billion as of December 31, 2011.
Further, UGC businesses maintain significant levels of investment-grade fixed maturity securities, including
substantial holdings in municipal and corporate bonds ($3.0 billion in the aggregate at December 31, 2011), which
UGC could monetize in the event liquidity levels are insufficient to meet obligations.
Global Capital Markets
AIG Markets acts as the derivatives intermediary between AIG companies and third parties and executes its
derivative trades under International Swaps and Derivatives Association, Inc. (ISDA) agreements. The agreements
with third parties typically require collateral postings. Many of AIG Markets’ transactions with AIG and its
subsidiaries also include collateral posting requirements. However, generally, no collateral is called under these
contracts unless it is needed to satisfy posting requirements with third parties. The active wind-down of the
AIGFP derivatives portfolio was completed by the end of the second quarter of 2011. Although the remaining
AIGFP derivatives portfolio may experience periodic fair value volatility, the portfolio consists predominantly of
transactions AIG believes are of low complexity, low risk, supportive of AIG’s risk management objectives or not
economically appropriate to unwind based on a cost versus benefit analysis. AIGFP continues to rely upon AIG
Parent to meet most of its collateral and other liquidity requirements in connection with its remaining derivatives
portfolio.
Cash collateral posted by AIG Markets to third parties was $174 million and $2 million at December 31, 2011
and 2010, respectively. Cash collateral obtained by AIG Markets from third parties was $372 million and
$1.1 billion at December 31, 2011 and 2010, respectively.
AIG 2011 Form 10-K 129