AIG 2010 Annual Report Download - page 322

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2010, a total of $21.0 billion was outstanding under the FRBNY Credit Facility, a net decrease
of $2.5 billion from December 31, 2009. The amount outstanding at December 31, 2010 included $6.4 billion of
accrued compounding interest and fees. On January 14, 2011, AIG used cash proceeds from the AIA initial public
offering and the sale of ALICO to fully repay and terminate the FRBNY Credit Facility in connection with the
closing of the Recapitalization. See Note 1 to the Consolidated Financial Statements for additional information.
Department of the Treasury Commitment: At December 31, 2010 a total of $7.5 billion was outstanding under
the Department of the Treasury Commitment (Series F), an increase of $2.2 billion from December 31, 2009. On
January 14, 2011 AIG drew down approximately $20.3 billion under this (Series F) Commitment to purchase a
portion of the SPV Preferred Interests that were exchanged with the Department of the Treasury. In connection
with the closing of the Recapitalization, $2 billion under the (Series F) Commitment was exchanged for the
Series G Drawdown Right, and the Series G Drawdown Right became effective on that date. See Note 1 to the
Consolidated Financial Statements for additional information.
(ii) Notes and bonds payable: In the fourth quarter of 2010, AIG raised approximately $2.5 billion in senior debt
and contingent liquidity. AIG issued an aggregate of $2.0 billion in senior unsecured notes, comprised of
$500 million in three-year notes and $1.5 billion in ten-year notes.
As of December 31, 2010, approximately $7.0 billion principal amount of senior notes were outstanding under
AIG’s medium-term note program, of which $3.2 billion was used for AIG’s general corporate purposes,
$453 million was used by AIGFP (‘‘Series AIGFP matched notes and bonds payable’’ in the preceding tables) and
$3.2 billion was used to fund the MIP. The maturity dates of these notes range from 2011 to 2052. To the extent
considered appropriate, AIG may enter into swap transactions to manage its effective borrowing rates with respect
to these notes.
As of December 31, 2010, the equivalent of $9.9 billion of notes were outstanding under AIG’s Euro
medium-term note program, of which $8.1 billion were used to fund MIP and the remainder was used for AIG’s
general corporate purposes. The aggregate amount outstanding includes a $602 million loss resulting from foreign
exchange translation into U.S. dollars related to notes issued to fund the MIP. AIG has economically hedged the
currency exposure arising from its foreign currency denominated notes.
AIG maintains a shelf registration statement in Japan, providing for the issuance of up to 300 billion Japanese
Yen ($3.7 billion at the December 31, 2010 exchange rate) principal amount of senior notes, of which the
equivalent of $618 million was outstanding at December 31, 2010.
(iii) Junior subordinated debt: During 2007 and 2008, AIG issued an aggregate of $12.5 billion of junior
subordinated debentures denominated in U.S. dollars, British Pounds and Euros in eight series of securities. In
connection with each series of junior subordinated debentures, AIG entered into a Replacement Capital Covenant
(RCC) for the benefit of the holders of AIG’s 6.25 percent senior notes due 2036. The RCCs provide that AIG
will not repay, redeem, or purchase the applicable series of junior subordinated debentures on or before a
specified date, unless AIG has received qualifying proceeds from the sale of replacement capital securities.
In May 2008, as adjusted for the one-for-twenty reverse split of AIG’s Common Stock effective June 30, 2009,
AIG raised a total of approximately $20 billion through the sale of (i) 9,835,526 shares of AIG Common Stock, in
a public offering at a price per share of $760; (ii) 78.4 million Equity Units in a public offering at a price per unit
of $75; and (iii) $6.9 billion in unregistered offerings of junior subordinated debentures in three series. The Equity
Units and junior subordinated debentures receive hybrid equity treatment from the major rating agencies under
their current policies but are recorded as long-term debt on the Consolidated Balance Sheet. The Equity Units
consist of an ownership interest in AIG junior subordinated debentures and a stock purchase contract obligating
the holder of an equity unit to purchase, and obligating AIG to sell, a variable number of shares of AIG Common
Stock on three dates in 2011 (a minimum of 6,447,224 shares and a maximum of 7,736,904 shares, subject to
anti-dilution adjustments).
306 AIG 2010 Form 10-K