AIG 2007 Annual Report Download - page 146

American International Group, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations Continued
5.75 percent to 5.90 percent on these amortizing ten-year corporate purposes and to provide backup for AGF’s commercial
borrowings depending on the delivery date of the aircraft. At paper programs.
December 31, 2007, ILFC had $664 million outstanding under In January 2007, AGF issued junior subordinated debentures in
this facility. The debt is collateralized by a pledge of the shares of an aggregate principal amount of $350 million that mature in
a subsidiary of ILFC, which holds title to the aircraft financed January 2067. The debentures underlie a series of trust preferred
under the facility. securities sold by a trust sponsored by AGF in a Rule 144A/
In May 2004, ILFC entered into a similarly structured Export Regulation S offering. AGF can redeem the debentures at par
Credit Facility for up to a maximum of $2.6 billion for Airbus beginning in January 2017.
aircraft to be delivered through May 31, 2005. The facility was As of December 31, 2007, notes and bonds aggregating
subsequently increased to $3.6 billion and extended to include $22.4 billion were outstanding with maturity dates ranging from
aircraft to be delivered through May 31, 2008. The facility 2008 to 2031 at interest rates ranging from 1.94 percent to
becomes available as the various European Export Credit Agen- 8.45 percent. To the extent deemed appropriate, AGF may enter
cies provide their guarantees for aircraft based on a nine-month into swap transactions to manage its effective borrowing rates
forward-looking calendar, and the interest rate is determined with respect to these notes and bonds. As a well-known seasoned
through a bid process. At December 31, 2007, ILFC had issuer, AGF filed an automatic shelf registration statement with
$1.9 billion outstanding under this facility. Borrowings with the SEC allowing AGF immediate access to the U.S. public debt
respect to these facilities are included in ILFC’s notes and bonds markets. At December 31, 2007, AGF had remaining corporate
payable in the preceding table of borrowings. The debt is authorization to issue up to $8.1 billion of debt securities under
collateralized by a pledge of shares of a subsidiary of ILFC, which its shelf registration statements.
holds title to the aircraft financed under the facility. AGF’s funding sources include a medium-term note program,
From time to time, ILFC enters into funded financing agree- private placement debt, retail note issuances, bank financing and
ments. As of December 31, 2007, ILFC had a total of $1.1 billion securitizations of finance receivables that AGF accounts for as on-
outstanding, which has varying maturities through February 2012. balance-sheet secured financings. In addition, AGF has become an
The interest rates are LIBOR-based, with spreads ranging from established issuer of long-term debt in the international capital
0.30 percent to 1.625 percent. markets.
The proceeds of ILFC’s debt financing are primarily used to In addition to debt refinancing activities, proceeds from the
purchase flight equipment, including progress payments during the collection of finance receivables are used to fund cash needs
construction phase. The primary sources for the repayment of this including the payment of principal and interest on AGF’s debt. AIG
debt and the interest expense thereon are the cash flow from does not guarantee any of the debt obligations of AGF. See also
operations, proceeds from the sale of flight equipment and the Liquidity.
rollover and refinancing of the prior debt. AIG does not guarantee
the debt obligations of ILFC. See also Liquidity herein. AIGCFG
AIGCFG has a variety of funding mechanisms for its various
AGF markets, including retail and wholesale deposits, short and long-
AGF fulfills most of its short-term cash borrowing requirements term bank loans, securitizations and intercompany subordinated
through the issuance of commercial paper. The issuance of debt. AIG Credit Card Company (Taiwan), a consumer finance
commercial paper is subject to the approval of AGF’s Board of business in Taiwan, and AIG Retail Bank PLC, a full service
Directors and is not guaranteed by AIG. AGF maintains committed consumer bank in Thailand, have issued commercial paper for the
syndicated revolving credit facilities which, as of December 31, funding of their respective operations. AIG does not guarantee any
2007, totaled $4.8 billion and which are summarized below under borrowings for AIGCFG businesses, including this commercial
Revolving Credit Facilities. The facilities can be used for general paper.
92 AIG 2007 Form 10-K