AIG 2011 Annual Report Download - page 321

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
changed from a fixed interest rate of 5.90 percent to a floating rate with an initial credit spread of 1.55 percent
plus the highest of (i) 3 month LIBOR; (ii) 10-year constant maturity treasury; and (iii) 30-year constant maturity
treasury. The interest rate will reset quarterly. The $400 million tranche has a fixed interest rate of 6.25 percent
until the 2015 call option date, and, if ILFC does not exercise the call option, the interest rate will change to a
floating rate, reset quarterly, based on the initial credit spread of 1.80 percent plus the highest of (i) 3 month
LIBOR; (ii) 10-year constant maturity treasury; and (iii) 30-year constant maturity treasury. If ILFC chooses to
redeem the $600 million tranche, 100 percent of the principal amount of the bonds being redeemed, plus any
accrued and unpaid interest to the redemption date must be paid. If ILFC chooses to redeem only a portion of
the outstanding bonds, at least $50 million principal amount of the bonds must remain outstanding.
Export Credit Agency Facility
ILFC had a $4.3 billion 1999 Export Credit Agency Facility (1999 ECA Facility) that was used in connection
with the purchase of 62 Airbus aircraft delivered through 2001. At December 31, 2010, ILFC had five loans with a
remaining principal balance of $13 million outstanding under this facility. In January 2011, all of the amounts
under the five remaining loans were repaid in full and no amounts remained outstanding under the 1999 ECA
Facility.
ILFC has a similarly structured 2004 Export Credit Agency Facility (2004 ECA Facility), which was amended in
May 2009 to allow ILFC to borrow up to a maximum of $4.6 billion to fund the purchase of Airbus aircraft
delivered through June 30, 2010. This facility is guaranteed by various European Export Credit Agencies. The
interest rates are either LIBOR based with spreads ranging from (0.04) percent to 2.25 percent or at fixed rates
ranging from 3.40 percent to 4.71 percent. ILFC financed 76 aircraft using approximately $4.3 billion under this
facility and approximately $2.3 billion and $2.8 billion were outstanding at December 31, 2011 and December 31,
2010, respectively. At December 31, 2011, the interest rate of the loans outstanding ranged from 0.44 percent to
4.71 percent. At December 31, 2010, the interest rate of the loans outstanding ranged from 0.43 percent to
4.71 percent. The debt is collateralized by a pledge of shares of a subsidiary of ILFC, which holds title to the
aircraft financed under the facility. The net book value of the related aircraft was $4.3 billion at both
December 31, 2011 and December 31, 2010.
ILFC’s current credit ratings require (i) the segregation of security deposits, maintenance reserves and rental
payments received for aircraft funded under its 2004 ECA Facilities into separate accounts, controlled by the
trustees of the 2004 ECA Facilities; and (ii) the filings of individual mortgages on the aircraft funded under the
facility in the respective local jurisdictions in which the aircraft is registered. At December 31, 2011, ILFC had
segregated security deposits, maintenance reserves and rental payments aggregating $415 million related to such
aircraft. Segregated rental payments are used to pay scheduled principal and interest on the 2004 ECA Facility as
they become due.
During 2010, ILFC entered into agreements to cross-collateralize the two ECA Facilities. In conjunction with
the agreement, ILFC agreed to an acceleration event, which would accelerate debt related to the ten aircraft
financed during 2010 if, among other things, ILFC were to sell aircraft with an aggregate net book value
exceeding an agreed upon amount, currently approximately $10.1 billion, within a period starting from the date of
the agreement until December 31, 2012.
Borrowings with respect to these facilities are included in ILFC’s notes and bonds payable in the preceding
table of borrowings. New financings are no longer available to ILFC under either the 1999 or 2004 ECA facility.
Bank Financings and Other Secured Financings
In 2010, ILFC amended its $2.5 billion revolving credit facility to, among other things, extend the maturity date
of $2.16 billion from October 2011 to October 2012, with the loan secured by aircraft with an appraised value of
not less than 133 percent of the principal amount of the outstanding loans, and increased the interest rate by 150
AIG 2011 Form 10-K 307