AIG 2010 Annual Report Download - page 325

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AIG Funding through the FRBNY Credit Facility. ILFC prepaid the principal balance and an accrued interest
amount of approximately $4.0 billion due under the Term Loans on August 20, 2010.
In addition, ILFC has a Euro medium-term note program for $7.0 billion, under which $1.2 billion in notes
were outstanding at December 31, 2010. Notes issued under the Euro medium-term note program are included in
ILFC notes and bonds payable in the preceding table of borrowings. ILFC has substantially eliminated the
currency exposure arising from foreign currency denominated notes by hedging the note exposure through swaps.
(ii) Subordinated debt: In December 2005, ILFC issued two tranches of subordinated debt totaling $1.0 billion.
Both tranches mature on December 21, 2065, but each tranche has a different call option. The $600 million
tranche had a call option date of December 21, 2010, and the $400 million tranche has a call option date of
December 21, 2015. ILFC did not exercise the call option at December 21, 2010 and the interest rate on the
$600 million tranche changed from a fixed interest rate of 5.90 percent to a floating rate with an initial credit
spread of 1.55 percent plus the highest of (i) 3 month LIBOR; (ii) 10-year constant maturity treasury; and (iii)
30-year constant maturity treasury. The interest rate will reset quarterly. The $400 million tranche has a fixed
interest rate of 6.25 percent until the 2015 call option date, and, if ILFC does not exercise the call option, the
interest rate will change to a floating rate, reset quarterly, based on the initial credit spread of 1.80 percent plus
the highest of (i) 3 month LIBOR; (ii) 10-year constant maturity treasury; and (iii) 30-year constant maturity
treasury. If ILFC chooses to redeem the $600 million tranche, they must pay 100 percent of the principal amount
of the bonds being redeemed, plus any accrued and unpaid interest to the redemption date. If ILFC chooses to
redeem only a portion of the outstanding bonds, at least $50 million principal amount of the bonds must remain
outstanding.
(iii) Export credit agency facility: ILFC has a $4.3 billion 1999 Export Credit Agency Facility (1999 ECA Facility)
that was used in connection with the purchase of 62 Airbus aircraft delivered through 2001. This facility is
guaranteed by various European Export Credit Agencies. The interest rate varies from 5.83 percent to
5.86 percent on these amortizing ten-year borrowings depending on the delivery date of the aircraft. At
December 31, 2010, ILFC had five loans with a remaining principal balance of $13 million outstanding under this
facility and the net book value of the related aircraft was $1.6 billion. At December 31, 2009, ILFC had 32 loans
with a remaining principal balance of $146 million outstanding under this facility. The net book value of the
related aircraft was $1.8 billion. In January 2011, all of the amounts under the five remaining loans were repaid in
full and no amounts remained outstanding under the 1999 ECA Facility.
ILFC has a similarly structured 2004 Export Credit Agency Facility (2004 ECA Facility), which was amended in
May 2009 to allow ILFC to borrow up to a maximum of $4.6 billion to fund the purchase of Airbus aircraft
delivered through June 30, 2010. This facility is also guaranteed by various European Export Credit Agencies. The
interest rates are either LIBOR based with spreads ranging from (0.04) percent to 2.25 percent or at fixed rates
ranging from 3.40 percent to 4.71 percent. At December 31, 2010, ILFC had financed 76 aircraft using
approximately $4.3 billion under this facility and approximately $2.8 billion was outstanding. At December 31,
2009, ILFC had financed 66 aircraft using approximately $4.0 billion under this facility and approximately
$2.9 billion was outstanding. At December 31, 2010, the interest rate of the loans outstanding ranged from
0.43 percent to 4.71 percent. At December 31, 2009, the interest rate of the loans outstanding ranged from
0.45 percent to 4.71 percent. The debt is collateralized by a pledge of shares of a subsidiary of ILFC, which holds
title to the aircraft financed under the facility. At December 31, 2010, the net book value of the related aircraft
was $4.3 billion. At December 31, 2009, the net book value of the related aircraft was $4.0 billion.
ILFC borrowed $327 million to refinance five aircraft and finance five new aircraft under the 2004 ECA Facility
during 2010. ILFC’s current credit ratings require (i) the segregation of security deposits, maintenance reserves
and rental payments received for aircraft funded under its 2004 ECA Facilities into separate accounts, controlled
by the trustees of the 2004 ECA Facilities; and (ii) the filings of individual mortgages on the aircraft funded under
the facility in the respective local jurisdictions in which the aircraft is registered. At December 31, 2010, ILFC had
segregated security deposits, maintenance reserves and rental payments aggregating $394 million related to such
AIG 2010 Form 10-K 309