AIG 2008 Annual Report Download - page 57

In September 2008, ILFC was unable to borrow in the public debt markets, and therefore, ILFC borrowed the
full $6.5 billion amount available under its credit facilities. ILFC was also accepted into the CPFF and had borrowed
approximately $1.7 billion under the CPFF as of December 31, 2008. On January 21, 2009, however, S&P
downgraded ILFC’s short-term credit rating and, as a result, ILFC lost access to the CPFF. The $1.7 billion ILFC
had borrowed under the CPFF was due and paid on January 28, 2009. ILFC is currently seeking secured financing.
ILFC has the capacity under its present facilities and indentures, to enter into secured financings in excess of
$5.0 billion. If ILFC continues to be limited in its ability to use this capacity, AIG expects that these borrowings and
cash flows from operations, which may include aircraft sales, will be inadequate to permit ILFC to meet its
obligations for 2009. Therefore, AIG will need to provide support through additional asset sales or funding for the
remaining amounts.
As a result of Moody’s downgrade of ILFC’s long-term debt rating, ILFC received notice under the provisions
of the Export Credit Facilities to segregate security deposits and maintenance reserves related to aircraft funded
under the facilities into separate accounts. 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. The
amount of funds required to be segregated under the facility agreements fluctuates with the changes in the related
deposits, maintenance reserves, and debt maturities. Further rating downgrades would impose additional restric-
tions under these facilities including the requirement to segregate rental payments and would require prior consent
to withdraw funds from the segregated account.
AIGFP
AIGFP had historically funded its operations through the issuance of notes and bonds, GIA borrowings and
other structured financing transactions. AIGFP also obtained funding through repurchase agreements.
In the last half of 2008, AIGFP’s access to its traditional sources of liquidity were significantly reduced and it
relied on AIG Parent to meet most of its liquidity needs. AIGFP’s asset backed commercial paper conduit, Curzon
Funding LLC, was accepted into the CPFF with a total borrowing limit of $7.2 billion, and had approximately
$6.8 billion outstanding at February 18, 2009. Separately, a structured investment vehicle sponsored, but not
consolidated, by AIGFP, Nightingale Finance LLC, was also accepted into the CPFF with a borrowing limit of
$1.1 billion. As of February 18, 2009, this vehicle had approximately $1.1 billion outstanding under the CPFF.
AGF
AGF’s traditional source of liquidity has been collections of customer receivables and borrowing in the public
markets.
In September 2008, AGF was unable to borrow in the public debt markets and drew down $4.6 billion, the full
amount available, under its primary credit facilities. AGF anticipates that its primary source of funds to support its
operations and repay its obligations will be customer receivable collections. In order to improve cash flow, AGF will
limit its lending activities and manage its expenses. In addition, AGF is pursuing sales of certain of its finance
receivables and seeking securitization financing. AIG expects that AGF’s existing sources of funds will be
inadequate to meet its debt and other obligations for 2009. Therefore, AIG will need to provide support through
additional asset sales or funding for the remaining amounts.
AIGCFG
AIGCFG experienced significant deposit withdrawals in Hong Kong during September 2008. AIGCFG
subsidiaries borrowed $1.6 billion from AIG in September and October of 2008 to meet these withdrawals and other
cash needs. No further material funding was required during the remainder of the fourth quarter of 2008.
Since November of 2008, AIGCFG subsidiaries have been able to retain significant deposit balances as a result
of the lowered perceived risk, as well as depository insurance support provided by various regulatory authorities in
countries in which AIGCFG units operate.
AIG 2008 Form 10-K 51
American International Group, Inc., and Subsidiaries