AIG 2010 Annual Report Download - page 225

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Repayment and Termination of the FRBNY Credit Facility
At the Closing, AIG repaid to the FRBNY approximately $21 billion in cash, representing complete repayment
of all amounts owing under the FRBNY Credit Facility, and the FRBNY Credit Facility was terminated. The
funds for the repayment came from the net cash proceeds from AIG’s sale of 67 percent of the ordinary shares of
AIA Group, Limited (AIA) in its initial public offering and from AIG’s sale of American Life Insurance Company
(ALICO). These funds were loaned to AIG, in the form of secured limited recourse debt (the SPV Intercompany
Loans), from the special purpose vehicles that held the proceeds of the AIA IPO and the ALICO sale (the SPVs,
and such loans, the SPV Intercompany Loans). The SPV Intercompany Loans are secured by pledges and any
proceeds received from the sale by AIG and certain of its subsidiaries of, among other collateral, all or part of
their equity interests in Nan Shan Life Insurance Company, Ltd. (Nan Shan) and International Lease Finance
Corporation (ILFC and, together with Nan Shan, the Designated Entities), as well as the remaining AIA ordinary
shares held by the AIA SPV and certain of the MetLife, Inc. (MetLife) securities received from the sale of
ALICO held by the ALICO SPV. Until their sale on February 1, 2011, AIG Star Life Insurance Company Ltd.
(AIG Star) and AIG Edison Life Insurance Company (AIG Edison) were also Designated Entities. See Note 26
herein.
Repurchase and Exchange of SPV Preferred Interests
At the Closing, AIG drew down approximately $20.3 billion (the Series F Closing Drawdown Amount) under
the Department of the Treasury’s commitment (the Department of the Treasury Commitment (Series F)) pursuant
to the Securities Purchase Agreement, dated as of April 17, 2009 (the Series F SPA), between AIG and the
Department of the Treasury relating to AIG’s Series F Fixed Rate Non-Cumulative Perpetual Preferred Stock, par
value $5.00 per share (the Series F Preferred Stock). The Series F Closing Drawdown Amount was the full
amount remaining under the Department of the Treasury Commitment (Series F), less $2 billion that AIG
designated to be available after the closing for general corporate purposes under a commitment relating to AIG’s
Series G Cumulative Mandatory Convertible Preferred Stock, par value $5.00 per share (the Series G Preferred
Stock), described below (the Series G Drawdown Right). The right of AIG to draw on the Department of the
Treasury Commitment (Series F) (other than the Series G Drawdown Right) was terminated.
AIG used the Series F Closing Drawdown Amount to repurchase all of the FRBNY’s SPV Preferred Interests.
AIG transferred the SPV Preferred Interests to the Department of the Treasury as part of the consideration for
the exchange of the Series F Preferred Stock, described below.
The Department of the Treasury, so long as it holds SPV Preferred Interests, has the right, subject to existing
contractual restrictions, to require AIG to dispose of the remaining AIA common shares held by the AIA SPV
and certain of the MetLife securities received from the sale of ALICO held by the ALICO SPV. The consent of
the Department of the Treasury, so long as it holds SPV Preferred Interests, will also be required for AIG to take
specified significant actions with respect to the Designated Entities, including initial public offerings, sales,
significant acquisitions or dispositions and incurrence of specified levels of indebtedness. If any SPV Preferred
Interests are outstanding on May 1, 2013, the Department of the Treasury will have the right to compel the sale of
all or a portion of one or more of the Designated Entities on terms that it will determine.
As a result of these transactions, the SPV Preferred Interests are no longer considered permanent equity on
AIG’s balance sheet, and will be classified as redeemable noncontrolling interests in partially owned consolidated
subsidiaries at the Closing.
Issuance of AIG’s Series G Preferred Stock
At the Closing, AIG and the Department of the Treasury amended and restated the Series F SPA to provide for
the issuance of 20,000 shares of Series G Preferred Stock by AIG to the Department of the Treasury. The
Series G Preferred Stock initially has a liquidation preference of zero, which will increase by the amount of any
AIG 2010 Form 10-K 209