AIG 2006 Annual Report Download - page 121

American International Group, Inc. and Subsidiaries
ber 31, 2006; $500 million was repaid in February 2007, and the Revolving Credit Facilities. These facilities are used as back up for
balance matures in March 2007. ILFC’s maturing debt and other obligations.
As a well-known seasoned issuer, ILFC has filed an automatic
shelf registration statement with the SEC allowing ILFC immediate
AIGFP
access to the U.S. public debt markets. For 2006, $1.90 billion of
AIGFP uses the proceeds from the issuance of notes and bonds debt securities were issued under this registration statement and
and GIA borrowings to invest in a diversified portfolio of securities $3.52 billion were issued under a prior registration statement. In
and derivative transactions. The borrowings may also be tempora- addition, ILFC has a Euro medium term note program for
rily invested in securities purchased under agreements to resell. $7.0 billion, under which $4.28 billion in notes were sold through
AIGFP’s notes and bonds include structured debt instruments December 31, 2006. Notes issued under the Euro medium term
whose payment terms are linked to one or more financial or other note program are included in ILFC Notes and bonds payable in the
indices (such as an equity index or commodity index or another preceding table of borrowings. The foreign exchange adjustment
measure that is not considered to be clearly and closely related to for the foreign currency denominated debt was $733 million at
the debt instrument). These notes contain embedded derivatives December 31, 2006 and $197 million at December 31, 2005.
that otherwise would be required to be accounted for separately ILFC has substantially eliminated the currency exposure arising
under FAS 133. Upon AIG’s early adoption of FAS 155, AIGFP from foreign currency denominated notes by economically hedging
elected the fair value option for these notes. The notes that are the portion of the note exposure not already offset by Euro-
accounted for using the fair value option are reported separately denominated operating lease payments, although such hedges did
under hybrid financial instrument liabilities. AIG guarantees the not qualify for hedge accounting treatment under FAS 133.
obligations of AIGFP under AIGFP’s notes and bonds and GIA ILFC had a $4.3 billion Export Credit Facility for use in
borrowings. See Operating Review — Financial Services Opera- connection with the purchase of approximately 75 aircraft deliv-
tions, Liquidity and Derivatives herein. ered through 2001. This facility was guaranteed by various
In June 2006, AIGFP sold an aggregate of $2.0 billion principal European Export Credit Agencies. The interest rate varies from
amount of senior, floating rate notes in Rule 144A offerings, of 5.75 percent to 5.90 percent on these amortizing ten-year
which $1.0 billion matures in 2007 and $1.0 billion matures in borrowings depending on the delivery date of the aircraft. At
2008. AIGFP also has a Euro medium term note program under December 31, 2006, ILFC had $1.0 billion outstanding under this
which an aggregate nominal amount of up to $10.0 billion of facility. The debt is collateralized by a pledge of the shares of a
notes may be outstanding at any one time. The program provides subsidiary of ILFC, which holds title to the aircraft financed under
that additional notes may be issued to replace matured or the facility.
redeemed notes. As of December 31, 2006, $5.66 billion of In May 2004, ILFC entered into a similarly structured Export
notes were outstanding under the program, including $575 million Credit Facility for up to a maximum of $2.64 billion for Airbus
resulting from foreign exchange translation into U.S. dollars. aircraft to be delivered through May 31, 2005. The facility was
AIGFP’s Rule 144A Notes and the notes issued under this subsequently increased to $3.64 billion and extended to include
program are guaranteed by AIG and are included in AIGFP’s Notes aircraft to be delivered through May 31, 2007. The facility
and Bonds Payable in the preceding table of borrowings. becomes available as the various European Export Credit Agen-
cies provide their guarantees for aircraft based on a six-month
AIG Funding forward-looking calendar, and the interest rate is determined
through a bid process. At December 31, 2006, ILFC had
AIG Funding, Inc. (AIG Funding), issues commercial paper that is
$1.7 billion outstanding under this facility. Borrowings with
guaranteed by AIG in order to help fulfill the short-term cash
respect to these facilities are included in ILFC’s Notes and bonds
requirements of AIG and its subsidiaries. The issuance of AIG
payable in the preceding table of borrowings.
Funding’s commercial paper, including the guarantee by AIG, is
From time to time, ILFC enters into funded financing agree-
subject to the approval of AIG’s Board of Directors or the Finance
ments. As of December 31, 2006, ILFC had a total of $1.2 billion
Committee of the Board if it exceeds certain pre-approved limits.
outstanding, which has varying maturities through February 2012.
As backup for the commercial paper program and for other
The interest rates are LIBOR-based, with spreads ranging from
general corporate purposes, AIG and AIG Funding maintain
0.30 percent to 1.625 percent.
revolving credit facilities, which, as of December 31, 2006, had
In December of 2005, ILFC issued two tranches of junior
an aggregate of $5.8 billion available to be drawn and which are
subordinated debt totaling $1.0 billion to underlie trust preferred
summarized below under Revolving Credit Facilities.
securities issued by a trust sponsored by ILFC. Both tranches
mature on December 21, 2065, but each tranche has a different
ILFC
call option. The $600 million tranche has a call date of
ILFC fulfills its short-term cash requirements through operating December 21, 2010 and the $400 million tranche has a call date
cash flows and the issuance of commercial paper. The issuance of December 21, 2015. The tranche with the 2010 call date has
of commercial paper is subject to the approval of ILFC’s Board of a fixed interest rate of 5.90 percent for the first five years. The
Directors and is not guaranteed by AIG. ILFC maintains syndicated tranche with the 2015 call date has a fixed interest rate of
revolving credit facilities which, as of December 31, 2006, 6.25 percent for the first ten years.
aggregated $6.5 billion and which are summarized below under
Form 10-K 2006 AIG 71