AIG Reduces Balance Owed to Federal Credit Facility
Saturday 11/08/2008 6:37 PM ET - Ambest
Related Companies
Symbol Last %Chg
AIG 2.11 12.83%
As of 4:01 PM ET 11/7/08
American International Group Inc. has reduced the amount it owes the U.S. government by more than $2 billion in the past week, using funding from the new federal commercial paper loan program.
AIG (NYSE: AIG) has cut to $81.2 billion from $83.5 billion the amount borrowed from federal loan facilities.
The total outstanding includes more than $61 billion that was under AIG?s $85 billion credit facility with the Federal Reserve Bank of New York, and the balance from a separate $37.8 billion securities lending program facility, said AIG spokesman Joe Norton.
?The access to the commercial paper funding facility allowed AIG to make voluntary prepayments under the $85 billion facility,? Norton said.
AIG has been given access to a total of $144 billion in federal funding assistance since September, in an effort to keep the giant insurer solvent.
It was approved on Oct. 30 for access to up to $20.9 billion through the Federal Reserve?s Commercial Paper Funding Facility, which the company said it would use in part to repay money borrowed from the Federal Reserve, as well as to refinance outstanding commercial paper as it matures and meet other working capital needs.
The two-year $85 billion loan facility agreement was reached on Sept. 16, for which the federal government received warrants redeemable for a 79.9% equity stake in the company. The agreement calls for AIG to pay significant interest -- more than would be paid in the commercial paper program -- and to sell assets to repay any money drawn down. The $37.8 billion securities lending facility, in which AIG "loans" the Federal Reserve investment-grade, fixed-income securities in exchange for the cash was announced on Oct. 8 (BestWire, Oct. 31, 2008).
The current Best's Financial Strength Rating of A (Excellent) for most of AIG's insurance units is under review with negative implications.
Shares of AIG were trading at $2.15 on the morning of Nov. 7, up 14.4% from the previous close.
(By Alyn Ackermann, senior associate editor, BestWeek: Alyn.Ackermann@ambest
