AIG 2011 Annual Report Download - page 225

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
November 2011 Exchange Offer
In November 2011, AIG exchanged specified series of its outstanding Junior Subordinated Debentures for newly
issued senior notes pursuant to an exchange offer. The exchange resulted in a 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, included in Other long-term debt in the Consolidated
Balance Sheet, which will be amortized as a reduction to future interest expense. See Note 15 herein for
additional information on this transaction.
Sales of Businesses
On January 12, 2011, AIG entered into an agreement to sell its 97.57 percent interest in Nan Shan to a Taiwan-
based consortium. The transaction closed on August 18, 2011 for net proceeds of $2.15 billion in cash. The net
proceeds from the transaction were used to pay down a portion of the liquidation preference of the Department
of the Treasury’s AIA SPV Preferred Interests.
On February 1, 2011, AIG completed the sale of AIG Star and AIG Edison to Prudential Financial, Inc., for
$4.8 billion, consisting of $4.2 billion in cash and $0.6 billion in the assumption of third-party debt. Of the
$4.2 billion in cash, AIG retained $2 billion to support the capital of Chartis, Inc. (Chartis) and its subsidiaries
pursuant to an agreement with the Department of the Treasury, and caused the remaining amount to be applied
to pay down a portion of liquidation preference of the Department of the Treasury’s AIA SPV Preferred Interests.
AIG recognized a pre-tax gain of $2.0 billion on the date of the sale which is reflected in Income (loss) from
discontinued operations in the Consolidated Statement of Operations.
See Note 4 herein for additional information on these transactions and Note 16 for discussion of
indemnification provisions.
Sale of MetLife Securities
On March 1, 2011, AIG entered into a Coordination Agreement among the ALICO SPV, AIG and
MetLife, Inc. (MetLife) regarding a series of integrated transactions (the MetLife Disposition) whereby MetLife
agreed to allow AIG to offer for sale earlier than contemplated under the original terms of the ALICO sale (the
ALICO Sale) the MetLife securities that AIG received when it sold ALICO to MetLife. The MetLife Disposition
included (i) the sale of MetLife common stock, par value $0.01 per share, and the sale of common equity units of
MetLife pursuant to two separate underwritten public offerings and (ii) the sale by the ALICO SPV of MetLife
preferred stock to MetLife.
In connection with the MetLife Disposition, on March 1, 2011, AIG and the ALICO SPV entered into a letter
agreement with the Department of the Treasury pursuant to which AIG and the ALICO SPV received the consent
of the Department of the Treasury to the MetLife Disposition. AIG completed the MetLife Disposition on
March 8, 2011 for a total of $9.6 billion and used $6.6 billion of the proceeds to pay down all of the liquidation
preference of the Department of the Treasury’s ALICO SPV Preferred Interests and a portion of the liquidation
preference of the Department of the Treasury’s AIA SPV Preferred Interests. In the first quarter of 2011, AIG
recognized a loss of $348 million, representing the decline in the value of the MetLife securities from
December 31, 2010 through their disposition on March 8, 2011, due to market conditions prior to the MetLife
Disposition. Of this amount, $191 million is reflected in Net realized capital gains (losses) and $157 million is
reflected in Net investment income in the Consolidated Statement of Operations. The remaining proceeds were
placed in escrow to secure indemnities provided to MetLife under the original terms of the ALICO stock
purchase agreement as described in Note 16 herein.
AIG 2011 Form 10-K 211