Implements Transaction Structure Announced November 10
NEW YORK--chron>Dec. 15, 2008--American International Group, Inc. (AIG) today announced that AIG's U.S.
life insurance companies (Life Insurance Companies) have sold to Maiden
Lane II LLC (ML II), a newly formed Delaware LLC in which the Federal
Reserve Bank of New York (FRBNY) is the sole member, their interests in
a pool of $39.3 billion face amount of residential mortgage-backed
securities (RMBS) held by their agent, AIG Securities Lending Corp., an
AIG subsidiary, in connection with AIG's U.S. securities lending
program. The agreement in principle between AIG and FRBNY for this
transaction was announced on November 10, 2008.
Edward M. Liddy, AIG Chairman and Chief Executive Officer, said: "AIG's
highest priority is the full repayment of the federal loan facility with
interest. The creation and launch of this financing entity will
eliminate the liquidity issues associated with AIG's U.S. securities
lending program, which will facilitate our repayment plan. Although we
have more work ahead of us, this is an important step forward. We
appreciate the support of the Federal Reserve Bank of New York in
implementing this transaction."
FRBNY extended a senior loan to ML II to enable the purchase of the RMBS
for an initial purchase price of $19.8 billion. The loan has a six-year
term, subject to extension by FRBNY. It is secured by the $39.3 billion
face amount of RMBS and bears interest at one-month LIBOR plus 1.0
percent. The purchase price may be increased as a result of the payment
of the deferred contingent purchase price described below.
The Life Insurance Companies applied the initial consideration from the
sale of the RMBS, along with available cash and $5.1 billion provided by
AIG in the form of capital contributions to the Life Insurance
Companies, to settle outstanding securities lending transactions under
AIG's U.S. securities lending program. Included in the terminations were
AIG's securities lending transactions with FRBNY under the securities
lending agreement announced in October, which totaled approximately
$20.5 billion at December 12, 2008. As a result of these transactions,
AIG's October securities lending agreement with FRBNY and AIG's U.S.
securities lending program have been terminated.
To the extent there are sufficient net cash proceeds available to ML II
from the RMBS after the senior loan from FRBNY is repaid in full, the
Life Insurance Companies will be entitled to receive a portion of the
deferred contingent purchase price from ML II of up to $1 billion plus
interest at one-month LIBOR plus 3.0 percent. After this fixed amount of
deferred contingent purchase price has been paid, the Life Insurance
Companies will be entitled to receive one-sixth of any remaining net
proceeds from the RMBS as additional deferred consideration for the sale
of the RMBS.
American International Group, Inc. (AIG), a world leader in insurance
and financial services, is the leading international insurance
organization with operations in more than 130 countries and
jurisdictions. AIG companies serve commercial, institutional and
individual customers through the most extensive worldwide
property-casualty and life insurance networks of any insurer. In
addition, AIG companies are leading providers of retirement services,
financial services and asset management around the world. AIG's common
stock is listed on the New York Stock Exchange, as well as the stock
exchanges in Ireland and Tokyo.
American International Group, Inc.
Charlene Hamrah, 212-770-7074
Nicholas Ashooh, 212-770-3523