AIG 2008 Annual Report Download - page 50

(Series F Preferred Stock). The facility will be available to AIG so long as AIG is not the debtor in a pending case
under Title 11, United States Code, and the Trust (or any successor entity established for the benefit of the United
States Treasury) “beneficially owns” more than 50 percent of the aggregate voting power of AIG’s voting securities
at the time of such drawdown.
The terms of the Series F Preferred Stock will be substantially similar to the Series E Preferred Stock, except
that the Series F Preferred Stock will not be subject to a replacement capital covenant or the statement of intent.
In connection with the equity capital commitment facility, the United States Department of the Treasury will
also receive warrants exercisable for a number of shares of common stock of AIG equal to 1 percent of AIG’s then
outstanding common stock and, upon issuance of the warrants, the dividends payable on, and the voting power of,
the Series C Preferred Stock will be reduced by the number of shares subject to the warrant.
Repayment of Fed Facility with Subsidiary Preferred Equity
On March 2, 2009, AIG and the NY Fed announced their intent to enter into a transaction pursuant to which
AIG will transfer to the NY Fed preferred equity interests in newly-formed special purpose vehicles (SPVs). Each
SPV will have (directly or indirectly) as its only asset 100 percent of the common stock of an AIG operating
subsidiary (AIA in one case and ALICO in the other). AIG expects to own the common interests of each SPV and
will initially have the right to appoint the entire board of directors of each SPV. In exchange for the preferred equity
interests received by the NY Fed, there would be a concurrent substantial reduction in the outstanding balance and
maximum available amount to be borrowed on the Fed Facility.
Securitizations
On March 2, 2009, AIG and the NY Fed announced their intent to enter into a transaction pursuant to which
AIG will issue to the NY Fed senior certificates in one or more newly-formed SPVs backed by inforce blocks of life
insurance policies in settlement of a portion of the outstanding balance of the Fed Facility. The amount of the Fed
Facility reduction will be based on the proceeds received. The SPVs are expected to be consolidated by AIG.
Modification to Fed Facility
On March 2, 2009, AIG and the NY Fed announced their agreement in principle to amend the Fed Credit
Agreement to remove the interest rate floor. Under the current terms, interest accrues on the outstanding borrowings
under the Fed Facility at three-month LIBOR (no less than 3.5 percent) plus 3.0 percent per annum. The 3.5 percent
LIBOR floor will be eliminated following the amendment. In addition, the Fed Facility will be amended to ensure
that the total commitment will be at least $25 billion, even after giving effect to the repayment of the Fed Facility
with subsidiary preferred equity and securitization transactions described above. These proceeds are expected to
substantially reduce the outstanding borrowings under the Fed Facility from the amount outstanding as of
December 31, 2008.
Liquidity Position
At December 31, 2008, AIG had outstanding borrowings under the Fed Facility of $36.8 billion, with a
remaining borrowing capacity of $23.2 billion, and accrued compounding interest and fees totaled $3.6 billion.
44 AIG 2008 Form 10-K
American International Group, Inc., and Subsidiaries