AIG 2008 Annual Report Download - page 284

AIGLH
At December 31, 2008, AIGLH notes and bonds payable aggregating $798 million were outstanding with
maturity dates ranging from 2010 to 2029 at interest rates from 6.625 percent to 7.50 percent. AIG guarantees the
notes and bonds of AIGLH.
Liabilities Connected to Trust Preferred Stock
AIGLH issued Junior Subordinated Debentures (liabilities) to certain trusts established by AIGLH, which
represent the sole assets of the trusts. The trusts have no independent operations. The trusts issued mandatory
redeemable preferred stock to investors. The interest terms and payment dates of the liabilities correspond to those
of the preferred stock. AIGLH’s obligations with respect to the liabilities and related agreements, when taken
together, constitute a full and unconditional guarantee by AIGLH of payments due on the preferred securities. AIG
guarantees the obligations of AIGLH with respect to these liabilities and related agreements. The liabilities are
redeemable, under certain conditions, at the option of AIGLH on a proportionate basis.
At December 31, 2008, the preferred stock outstanding consisted of $300 million liquidation value of
8.5 percent preferred stock issued by American General Capital II in June 2000, $500 million liquidation value of
8.125 percent preferred stock issued by American General Institutional Capital B in March 1997, and $500 million
liquidation value of 7.57 percent preferred stock issued by American General Institutional Capital A in December
1996.
ILFC
(i) Notes and bonds payable: At December 31, 2008, notes aggregating $20.1 billion were outstanding,
consisting of $7.7 billion of term notes, $12.4 billion of medium-term notes with maturities ranging from 2009 to
2015 and interest rates ranging from 1.62 percent to 7.95 percent and $1.0 billion of junior subordinated debt as
discussed below. Notes aggregating $4.1 billion are at floating interest rates and the remainder are at fixed rates.
ILFC enters into swap transactions to manage its effective borrowing rates with respect to these notes.
ILFC does not currently have access to its traditional sources of long-term or short-term financing through the
public debt markets. ILFC currently has the capacity under its present facilities and indentures to enter into secured
financings in excess of $5.0 billion.
As a well-known seasoned issuer, ILFC has an effective shelf registration statement with the SEC. At
December 31, 2008, $6.9 billion of debt securities had been issued under this registration statement. In addition,
ILFC has a Euro medium-term note program for $7.0 billion, under which $2.3 billion in notes were outstanding at
December 31, 2008. Notes issued under the Euro medium-term note program are included in ILFC notes and bonds
payable in the preceding table of borrowings. ILFC has substantially eliminated the currency exposure arising from
foreign currency denominated notes by hedging the note exposure through swaps.
(ii) Junior subordinated debt: In December 2005, ILFC issued two tranches of junior subordinated debt
totaling $1.0 billion to underlie trust preferred securities issued by a trust sponsored by ILFC. The $600 million
tranche has a call date of December 21, 2010 and the $400 million tranche has a call date of December 21, 2015.
Both tranches mature on December 21, 2065. The $600 million tranche has a fixed interest rate of 5.90 percent for
the first five years. The $400 million tranche has a fixed interest rate of 6.25 percent for the first ten years. Both
tranches have interest rate adjustments if the call option is not exercised based on a floating quarterly reset rate equal
to the initial credit spread plus the highest of (i) 3-month LIBOR, (ii) 10-year constant maturity treasury and
(iii) 30-year constant maturity treasury.
(iii) Export credit facility: At December 31, 2008, ILFC had $365 million outstanding under a $4.3 billion
Export Credit Facility (ECA) used in the purchase of approximately 75 aircraft delivered through 2001. The interest
rate varies from 5.75 percent to 5.86 percent on these amortizing ten-year borrowings depending on the delivery
date of the aircraft. The debt is collateralized by a pledge of the shares of a subsidiary of ILFC, which holds title to
the aircraft financed under the facility. This facility was guaranteed by various European Export Credit Agencies.
278 AIG 2008 Form 10-K
American International Group, Inc., and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)