AIG 2011 Annual Report Download - page 223

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Issuance and Cancellation of AIG’s Series G Preferred Stock
At the Closing, AIG and the Department of the Treasury amended and restated the Series F SPA to provide for
the issuance of 20,000 shares of Series G Preferred Stock by AIG to the Department of the Treasury. The
Series G Preferred Stock was issued with a liquidation preference of zero. Because the net proceeds to AIG from
the completion of the registered public offering of AIG Common Stock in the May Common Stock Offering of
$2.9 billion exceeded the $2.0 billion Series G Drawdown Right, the Series G Drawdown Right was terminated
and the Series G Preferred Stock was cancelled immediately thereafter.
Exchange of AIG’s Series C, E and F Preferred Stock for AIG Common Stock and Series G
Preferred Stock
At the Closing:
• the shares of AIG’s Series C Perpetual, Convertible, Participating Preferred Stock, par value $5.00 per share
(the Series C Preferred Stock), held by the Trust, were exchanged for 562,868,096 shares of newly issued
AIG Common Stock, which were subsequently transferred by the Trust to the Department of the Treasury;
• the shares of AIG’s Series E Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per
share (the Series E Preferred Stock), held by the Department of the Treasury, were exchanged for
924,546,133 newly issued shares of AIG Common Stock; and
• the shares of the Series F Preferred Stock held by the Department of the Treasury, were exchanged for
(a) the SPV Preferred Interests, (b) 20,000 shares of the Series G Preferred Stock (subsequently cancelled)
and (c) 167,623,733 shares of newly issued AIG Common Stock.
The issuance of AIG Common Stock to the Department of the Treasury described above significantly affected
the determination of Net income (loss) attributable to AIG common shareholders and the weighted average
shares outstanding, both of which are used to compute earnings per share. See Note 17 herein for further
discussion.
AIG entered into a registration rights agreement (the Registration Rights Agreement) with the Department of
the Treasury that granted the Department of the Treasury registration rights with respect to the shares of AIG
Common Stock issued at the Closing. The May Common Stock Offering was conducted in accordance with the
right of AIG under the Registration Rights Agreement to complete a registered primary offering of AIG Common
Stock. Current rights of the Department of the Treasury under the Registration Rights Agreement include:
• the right to participate in any future registered offering of AIG Common Stock by AIG;
• the right to demand that AIG effect a registered market offering of its shares no more than twice in any
12-month period;
• the right to engage in at-the-market offerings; and
• subject to certain exceptions, the right to approve the terms, conditions and pricing of any registered offering
in which it participates until its ownership falls below 33 percent of AIG’s voting securities.
AIG has the right to raise the greater of $2 billion and the amount of the projected liquidity shortfall if the
AIG Board of Directors determines, after consultation with the Department of the Treasury, that due to events
affecting AIG’s insurance subsidiaries, AIG Parent’s reasonably projected aggregate liquidity (cash and cash
equivalents and commitments of credit) will fall below $8 billion within 12 months of the date of such
determination.
Until the Department of the Treasury’s ownership of AIG’s voting securities falls below 33 percent, the
Department of the Treasury will, subject to certain exceptions, have complete control over the terms, conditions
AIG 2011 Form 10-K 209