AIG 2009 Annual Report Download - page 317

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Exchange of AIG Series D Preferred Stock for AIG Series E Preferred Stock
On April 17, 2009, AIG entered into a Securities Exchange Agreement (the AIG Series E Exchange Agreement)
with the Department of the Treasury pursuant to which, among other things, the Department of the Treasury
exchanged 4,000,000 shares of AIG Series D Preferred Stock for 400,000 shares of AIG Series E Preferred Stock with
an aggregate liquidation preference of $41,604,576,000, which represented the issuance-date aggregate liquidation
preference of the AIG Series D Preferred Stock surrendered plus accumulated but unpaid dividends thereon of
$1,604,576,000 ($401.14 per share). The terms of the AIG Series E Preferred Stock are substantially the same as those
of the AIG Series D Preferred Stock, except that the dividends are not cumulative and the AIG Series E Preferred
Stock is subject to a replacement capital covenant. Concurrently with the exchange of the shares of AIG Series D
Preferred Stock for shares of the AIG Series E Preferred Stock, AIG entered into a replacement capital covenant in
favor of the holders of a series of AIG debt, pursuant to which AIG agreed that prior to the third anniversary of the
issuance of the AIG Series E Preferred Stock, AIG will not redeem or purchase, and no subsidiary of AIG will
purchase, all or any part of the AIG Series E Preferred Stock except with the proceeds obtained from the issuance by
AIG or any subsidiary of AIG of certain capital securities.
The AIG Series E Exchange Agreement also permits the Department of the Treasury, under certain circumstances,
to exchange the warrant (AIG Series D Warrant) received in connection with the issuance of AIG Series D Preferred
Stock for 2,689,938 shares of AIG’s Series C Perpetual, Convertible, Participating Preferred Stock (the AIG Series C
Preferred Stock).
Issuance of AIG Series F Preferred Stock and Entry into $29.835 Billion Department of the Treasury Commitment
On April 17, 2009, AIG entered into a Securities Purchase Agreement (the AIG Series F Purchase Agreement)
with the Department of the Treasury pursuant to which, among other things, AIG issued to the Department of the
Treasury (i) 300,000 shares of AIG Series F Preferred Stock, and (ii) the warrant (AIG Series F Warrant) to purchase
150 shares of AIG Common Stock.
Pursuant to the AIG Series F Purchase Agreement, the Department of the Treasury has committed for five years to
provide immediately available funds in an amount up to $29.835 billion (the Available Amount) so long as:
• AIG is not a debtor in a pending case under Title 11 of the United States Code; and
• the Trust (or any successor entity established for the sole benefit of the United States Treasury) and the
Department of the Treasury, in the aggregate, ‘‘beneficially own’’ more than 50 percent of the aggregate voting
power of AIG’s voting securities.
The Available Amount will be decreased by the aggregate amount of financial assistance that the Department of the
Treasury provides to AIG, its subsidiaries or any SPV established by or for the benefit of AIG or any of its subsidiaries
after the issuance of the AIG Series F Preferred Stock and the AIG Series F Warrant, unless otherwise specified by
the Department of the Treasury, in its sole discretion, under the terms of such financial assistance.
The AIG Series E Exchange Agreement and the AIG Series F Purchase Agreement restrict AIG’s ability to
repurchase capital stock and require AIG to continue to maintain policies limiting corporate expenses, lobbying
activities and executive compensation.
The terms of the AIG Series F Preferred Stock are substantially the same as the AIG Series E Preferred Stock,
except that the AIG Series F Preferred Stock is not subject to a replacement capital covenant. The liquidation
preference of the AIG Series F Preferred Stock was initially $0 per share and will be increased pro rata by the amount
of each drawdown of the Department of the Treasury Commitment. During 2009, AIG drew down on the Department
of the Treasury Commitment in the amount of approximately $5.34 billion. As a result, the liquidation preference of
the AIG Series F Preferred Stock increased to $17,814.72 per share.
The AIG Series F Warrant is exercisable, at any time, at an initial exercise price of $0.000001 per share. The AIG
Series F Warrant will not be subject to any contractual restrictions on transfer other than such as are necessary to
309 AIG 2009 Form 10-K