AIG 2008 Annual Report Download - page 285

At December 31, 2008, ILFC had $2.1 billion outstanding under a similarly structured ECA under which it
may borrow up to a maximum of $3.6 billion for aircraft to be delivered through May 31, 2009. The facility becomes
available as the various European Export Credit Agencies provide their guarantees for aircraft based on a forward-
looking calendar, and the interest rate is determined through a bid process. The interest rates are either LIBOR-
based with spreads ranging from (0.04) percent to 0.90 percent or at fixed rates ranging from 4.2 percent to
4.7 percent. At December 31, 2008, the interest rates of the loans outstanding ranged from 2.51 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. Borrowings with respect to these facilities are included in ILFC’s notes and bonds
payable in the preceding table of borrowings.
Under these Export Credit Facilities, ILFC may be required to segregate deposits and maintenance reserves for
the financed aircraft into separate accounts in connection with certain credit rating downgrades. As a result of
Moody’s October 3, 2008 downgrade of ILFC’s long-term debt rating to Baa1, ILFC received notice from the
security trustees of the facilities to segregate into separate accounts security deposits and maintenance reserves
related to aircraft funded under the facility. ILFC had 90 days from the date of the notice to comply, and subsequent
to December 31, 2008, ILFC segregated approximately $260 million of deposits and maintenance reserves. Funds
required to be segregated under the facility agreements fluctuate with changes in deposits, maintenance reserves
and debt maturities related to the aircraft funded under the facilities. Further credit rating declines could impose
additional restrictions under the Export Credit Facilities including the requirement to segregate rental payments and
would require prior consent to withdraw funds from the segregated account.
(iv) Bank financings: From time to time, ILFC enters into various bank financings. At December 31, 2008,
the total funded amount was $7.6 billion. The financings mature through 2012. The interest rates are LIBOR-based,
with spreads ranging from 0.30 percent to 1.625 percent. At December 31, 2008, the interest rates ranged from
2.15 percent to 4.36 percent.
AIG does not guarantee any of the debt obligations of ILFC.
AGF
(i) Notes and bonds payable: At December 31, 2008, notes and bonds aggregating $23.1 billion were
outstanding with maturity dates ranging from 2009 to 2031 at interest rates ranging from 0.23 percent to 9 percent.
AGF has entered into swap transactions to manage its effective borrowing rates with respect to several of these notes
and bonds.
(ii) Junior subordinated debt: At December 31, 2008, junior subordinated debentures aggregating $349 mil-
lion were outstanding that mature in January 2067. The debentures underlie a series of trust preferred securities sold
by a trust sponsored by AGF in a Rule 144A/Regulation S offering. AGF can redeem the debentures at par beginning
in January 2017.
AIG does not guarantee any of the debt obligations of AGF but has provided a capital support agreement for the
benefit of AGF’s lenders under the AGF 364-Day Syndicated Facility.
Both ILFC and AGF have drawn the full amount available under their revolving credit facilities.
AIG’s syndicated facilities contain a covenant requiring AIG to maintain total shareholders’ equity (calculated
on a consolidated basis consistent with GAAP) of at least $50 billion at all times. If AIG fails to maintain this level
of total shareholders’ equity at any time, it will lose access to those facilities. Additionally, if an event of default
occurs under those facilities, including AIG failing to maintain $50 billion of total shareholders’ equity at any time,
which causes the banks to terminate either of those facilities, then AIG may be required to collateralize
AIG 2008 Form 10-K 279
American International Group, Inc., and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)