AIG signs $85 billion deal with New York Federal Reserve

[maddezmom]

Source: BusinessInsurance.com

NEW YORK—American International Group Inc. has signed an agreement with the Federal Reserve Bank of New York, that will provide the $85 billion revolving credit facility the insurer will use to address its liquidity problems.

The move will allow the insurer to sell assets and emerge as a smaller, yet profitable company, according to AIG Chairman and Chief Executive Officer Edward Liddy.

The deal, reached Tuesday, calls for AIG to repay the facility from—among other things—the proceeds of asset sales and issuances of debt or equity securities, the insurer said in a statement. The mandatory payments will reduce the amount available to be borrowed under the facility, AIG said.

AIG will pay interest on the two-year loan at a rate based on three-month LIBOR (the rate of interest at which banks borrow funds from other banks in the London wholesale money market) plus 8.5%. An initial “gross commitment fee” of 2% is also required, as is a commitment fee on undrawn amounts of 8.5% per year. Interest and fees generally will be payable through an increase in the outstanding balance of the facility.



Read more: http://www.businessinsurance.com/cgi-bin/news.pl?post_date=2008-09-24&id=14034

[wishlist]

1. Should eliminate need for US govt bailout of AIG if they've done that nt

[grannie4peace]

2. sounds good to me :):)

[whistle]

3. Says, "AIG made an exhaustive effort to address its liquidity needs through private sector financing

... but was unable to do it in the current environment", end of quote.

So if this is not private sector financing, then it must be public financing or at least backed by public guarantees. Tax payers may still get stuck bailing the AIG out. I really hope this deal has layers of transparency and accountability to it. I still feel this will be a financial time bomb for the next president and God help us that won't be that rat bastard John McCain who has vowed to dissolve the current Social Security trust fund and privatize the whole program.

[Ikonoklast]

4. The deal the Fed struck with AIG is draconian

The fed will make out on this; the assets held by AIG are worth far more than the loan guarantee. They got caught by European banks holding useless credit swaps.

AIG was the insurer of that bad debt, and didn't have enough credit or liquidity to cover those losses.

If AIG was given time to liquidate assets in an orderly fashion to raise capital, the government money would never have been needed.

[CountAllVotes]

5. AIG is being investigated by the FBI for FRAUD

and they get money for WHAT!? :mad: :argh:

:kick: