AIG 2011 Annual Report Download - page 222

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
in accelerated amortization of the remaining prepaid commitment fee asset resulting from the termination of the
FRBNY Credit Facility.
Repayment and Termination of the FRBNY Credit Facility
At the Closing, AIG repaid to the FRBNY approximately $21 billion in cash, representing complete repayment
of all amounts owed under the FRBNY Credit Facility, and the FRBNY Credit Facility was terminated. The funds
for the repayment came from the net cash proceeds from AIG’s sale of 67 percent of the ordinary shares of AIA
in its initial public offering and from AIG’s sale of American Life Insurance Company (ALICO) in 2010. These
funds were loaned to AIG in the form of secured limited recourse debt from the special purpose vehicles that
held the proceeds of the AIA IPO and the ALICO sale (the AIA SPV and the ALICO SPV, respectively, and
collectively, the SPVs). The loan from the ALICO SPV was repaid in full during 2011. The loan from the AIA
SPV is secured by pledges and any proceeds received from the sale by AIG and certain of its subsidiaries of,
among other collateral, all or part of their equity interest in International Lease Finance Corporation (ILFC or
the Designated Entity). Proceeds from the sales of the remaining ordinary shares of AIA held by the AIA SPV
will be used to pay down the liquidation preference of the Department of the Treasury’s preferred interests in the
AIA SPV (the AIA SPV Preferred Interests) (described below). Until their respective sales on February 1, 2011
and August 18, 2011 as further discussed in Sales of Divested Businesses below, AIG’s Japan-based life insurance
subsidiaries, AIG Star Life Insurance Company Ltd. (AIG Star) and AIG Edison Life Insurance Company (AIG
Edison), and Nan Shan Life Insurance Company, Ltd. (Nan Shan), were also Designated Entities.
Repurchase and Exchange of SPV Preferred Interests
At the Closing, AIG drew down approximately $20.3 billion (the Series F Closing Drawdown Amount) under
the Department of the Treasury’s commitment (the Department of the Treasury Commitment (Series F)) pursuant
to the Securities Purchase Agreement, dated as of April 17, 2009 (the Series F SPA), between AIG and the
Department of the Treasury relating to AIG’s Series F Fixed Rate Non-Cumulative Perpetual Preferred Stock, par
value $5.00 per share (the Series F Preferred Stock). The Series F Closing Drawdown Amount was the full
amount remaining under the Department of the Treasury Commitment (Series F), less $2 billion that AIG
designated to be available after the closing for general corporate purposes under a commitment relating to AIG’s
Series G Cumulative Mandatory Convertible Preferred Stock, par value $5.00 per share (the Series G Preferred
Stock), described below (the Series G Drawdown Right). The right of AIG to draw on the Department of the
Treasury Commitment (Series F) (other than the Series G Drawdown Right) was terminated.
AIG used the Series F Closing Drawdown Amount to repurchase all of the FRBNY’s AIA SPV Preferred
Interests and the preferred interests in the ALICO SPV (together with the AIA SPV Preferred Interests, the SPV
Preferred Interests). AIG transferred the SPV Preferred Interests to the Department of the Treasury as part of
the consideration for the exchange of the Series F Preferred Stock (described below).
The Department of the Treasury, so long as it holds AIA SPV Preferred Interests, has the right, subject to
existing contractual restrictions, to require AIG to dispose of the remaining AIA ordinary shares held by the AIA
SPV to the extent necessary to fully repay the liquidation preference on the Department of the Treasury’s AIA
SPV Preferred Interests. In addition, the consent of the Department of the Treasury, so long as it holds SPV
Preferred Interests, will be required for AIG to take specified significant actions with respect to the Designated
Entity, ILFC, including an IPO, sales, significant acquisitions or dispositions and incurrence of specified levels of
indebtedness. If any SPV Preferred Interests are outstanding on May 1, 2013, the Department of the Treasury will
have the right to compel the sale of all or a portion of ILFC on terms that it will determine.
As a result of these transactions, the AIA SPV Preferred Interests are no longer considered permanent equity
on AIG’s Consolidated Balance Sheet, and are classified as Redeemable noncontrolling nonvoting, callable, junior
preferred interests held by the Department of the Treasury.
208 AIG 2011 Form 10-K