AIG 2009 Annual Report Download - page 60

American International Group, Inc., and Subsidiaries
On October 13, 2009, ILFC entered into two term loan agreements (the Term Loans) with AIG Funding comprised
of a new $2.0 billion credit agreement and a $1.7 billion amended and restated credit agreement. The Term Loans are
secured by a portfolio of aircraft and all related equipment and leases. ILFC used the proceeds from the $2.0 billion
loan to repay in full its obligations under its $2.0 billion revolving credit facility that matured on October 15, 2009. The
second credit agreement amended and restated the two demand note agreements aggregating $1.7 billion that ILFC
entered into in March 2009 with AIG Funding, including extending the maturity date of such demand notes. Both
Term Loans mature on September 13, 2013 and currently bear interest at 3-month LIBOR plus 6.025%. The Term
Loans are due in full at maturity with no scheduled amortization. On December 4, 2009, the new $2.0 billion credit
agreement was increased to $2.2 billion. The funds for the Term Loans were provided to AIG Funding through the
FRBNY Credit Facility. As a condition of the FRBNY approving the Term Loans, ILFC entered into agreements to
guarantee the repayment of AIG’s obligations under the FRBNY Credit Agreement up to an amount equal to the
aggregate outstanding balance of the Term Loans.
As a result of the Term Loans, ILFC’s available capacity under its present facilities and indentures to enter into
secured financing was approximately $800 million at February 17, 2010.
AIGFP
Prior to September 2008, AIGFP had historically funded its operations through the issuance of notes and bonds,
GIA borrowings, other structured financing transactions and repurchase agreements.
In the second half of 2008, AIGFP’s access to its traditional sources of liquidity was 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
$1.2 billion outstanding at February 17, 2010. 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 and had approximately $1.1 billion outstanding at February 17, 2010. All of the commercial paper matures
in April 2010. AIGFP intends to repay this commercial paper at maturity, which will most likely lead to an increase in
borrowings under the FRBNY Credit Facility.
The following table presents a rollforward of the amount of collateral posted by AIGFP:
Additional
Collateral Postings, Collateral Collateral
Year Ended December 31, 2009 Posted as of Netted by Returned by Posted as of
(in millions) December 31, 2008 Counterparty Counterparties December 31, 2009
Collateralized GIAs and other borrowings $ 9,401 $ 429 $ 3,701 $ 6,129
Derivatives (including super senior credit default
swaps) 22,791 2,098 15,082 9,807
Total $32,192 $2,527 $18,783 $15,936
AGF
Prior to September 2008, AGF’s traditional source of liquidity had been collections of customer receivables and
borrowings in the public markets.
With its continued inability to access traditional capital market sources, AGF anticipates that its primary source of
funds to support its operations and repay its obligations will be customer receivable collections and additional
on-balance sheet securitizations and portfolio sales. In order to improve cash flow from operations, AGF has
significantly limited its lending activities and aggressively managed its expenses. Since September 2008 and through
February 17, 2010, AGF’s alternative funding sources have included proceeds of $1.9 billion from real estate loan
portfolio sales and cash proceeds of $967 million from a real estate loan securitization. AGF is considering additional
sales and/or securitizations of its finance receivables. In addition, AIG is exploring other restructuring opportunities
for AGF. AIG intends to provide support to AGF through February 28, 2011 to the extent that asset sales,
securitizations and/or other transactions are not sufficient to meet AGF’s liquidity needs. AIG made a $600 million
capital contribution to AGF (through AIG Capital Corporation) during 2009, and AGF loaned $1.6 billion to AIG
parent under demand notes. In July 2009, AGF converted the $2.45 billion of loans that AGF had previously drawn on
AIG 2009 Form 10-K 52