AIG Borrows Another $2.1 Billion from Fed
Nov. 10, 2009 – Officials for taxpayer-rescued American International Group (AIG) accessed another $2.1 billion of its $182.5 billion federal bailout in order to purchase shares of its subsidiary aircraft-leasing unit, the International Lease Finance Corporation (ILFC).
AIG officials revealed the $2.1 billion request on its quarterly federal filing last week. Company officials are attempting to sell its interest in the ILFC, which is one of the largest aircraft-leasing firms in the world and considered by many industry analysts to be the top customer of large jet aircraft manufacturers Boeing and U.K.-based Airbus.
The $2.1 billion will be withdrawn from a special federal lending facility created specifically for AIG through the Federal Reserve Bank of New York. AIG officials anticipate receiving the funds by Friday, according to its recent federal filing.
AIG, bailed out last year by the government, is trying to sell ILFC. It was able to draw from a credit facility established by the Federal Reserve Bank of New York, and said in the Securities and Exchange Commission filing it expects to receive the funds on Nov. 13.
AIG in March loaned $1.7 billion to the aircraft-leasing unit to meet the subsidiary’s debt obligations and extended another $2 billion to it in October. The firm has been trying to sell the large aircraft-leasing unit, but tightened global credit markets during a down economy have made it difficult to for suitors to obtain financing. Officials for the Federal Reserve Bank required ILFC officials to sign papers naming the aircraft-leasing firm the loan’s guarantor.
The ILFC owns about $7.4 billion worth of aircraft and other assets acting as collateral for the federal loans. Officials for the aircraft-leasing firm said they fully would repay the loans if AIG sells its interests in the unit.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials in September 2008 agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Under the new plan, the Federal Reserve provided AIG $60 billion in loans and the U.S. Treasury another $40 billion so company officials could buy up preferred stock. Federal officials also approved $53 billion to purchase the company’s risky mortgage-backed assets and other debt contracts.
AIG attempted to sell off its overseas life insurance units and other subsidiaries to repay up to $60 billion in loans this year, but a combination of tightened global credit markets, a shortage of qualified buyers and decreased market values during a global economic downturn have caused the firm to fall short of its lofty goal. Company officials intend to focus future business on property and casualty insurance markets and maintain a minority financial interest in some profitable overseas ventures.
AIG has raised more than $4 billion through the sale of several of its subsidiary units. Industry analysts say the insurer could raise up to $50 billion through the sales of AIG’s U.S.-based and overseas life insurance units and retirement savings units.
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