AIG 2012 Annual Report Download - page 324

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Equity Units
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In May 2008, we sold 78.4 million equity units (the Equity Units) at a price per unit of $75 for gross proceeds of
$5.88 billion. The Equity Units included 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 for $25 in cash.
We were obligated to pay quarterly contract adjustment payments to the holders of the stock purchase contracts
under the Equity Units, at an initial annual rate of 2.71 percent applied to the stated amount. The present value of
the contract adjustment payments, $431 million, was recognized at inception as a liability (a component of Other
liabilities), and was recorded as a reduction to Additional paid-in capital.
In addition to the stock purchase contracts, as part of the Equity Units, we issued $1.96 billion of each of the
Series B-1, B-2 and B-3 junior subordinated debentures, which initially paid interest at rates of 5.67 percent,
5.82 percent and 5.89 percent, respectively.
The junior subordinated debentures were recorded as Other long-term debt in the Consolidated Balance Sheet. The
principal amount we owed on the subordinated debentures was equal to the amount owed to us under the related
stock purchase contract.
On November 23, 2010, we commenced an offer to exchange up to 74,480,000 of our Equity Units for consideration
per Equity Unit equal to 0.09867 share of AIG Common Stock plus $3.2702 in cash (the Exchange Offer). The stock
and cash received was the result of netting payments from two separate transactions, a repurchase of the
subordinated debentures and a cancellation of the stock purchase contracts.
On November 29, 2010, holders of 49,474,600 Equity Units accepted the Exchange Offer and their units were
tendered in exchange for 4,881,667 shares of AIG Common Stock and $162 million in cash. Following the
completion of the exchange offer, a total of 28,925,400 Equity Units remained outstanding. The execution of the
Exchange Offer resulted in a loss on the extinguishment of the subordinated debentures of approximately
$104 million and an increase to equity of approximately $3.7 billion.
In 2011, we remarketed the three series of debentures included in the Equity Units. We purchased and retired all of
the Series B-1, B-2 and B-3 Debentures representing $2.2 billion in aggregate principal and as of December 31,
2011, we had issued approximately 1.8 billion shares of AIG Common Stock in connection with the settlement of the
stock purchase contracts underlying the Equity Units.
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AIG 2012 Form 10-K 307
ITEM 8 / NOTE 17. TOTAL EQUITY