AIG, took a step closer to independence from government as it said it had secured $4.3 billion in credit facilities.
The U.S. insurer bailed out by Washington during the financial crisis is is in the process of repaying the $95 billion the U.S. Treasury and the Federal Reserve Bank of New York lent following its disastrous decision to insure billions of dollars worth of securities backed by mortgages, and.
Under the facilities arranged by 36 banks and administered by JPMorgan Chase, AIG can borrow $1.5 billion over three years and an additional $1.5 billion over 364 days, according to a regulatory filing.
Separately, Chartis, an AIG division, obtained a $1.3 billion credit line.
The agreements are based on conditions outlined in the regulatory filing, including AIG’s previously announced plan to pay back a $20 billion Federal Reserve Bank of New York credit line by March 31.
Robert Benmosche, AIG’s chief executive, said securing these credit agreements was “another important vote of confidence by the market in AIG”
He said: “As we approach year’s end, we believe we are close enough to completing our recapitalization plan that we can see the finish line”.
The credit facilities are the latest steps taken by AIG to return to normalized operations.
In September, the insurer outlined a plan to use the proceeds from asset sales and equity offerings to repay the credit line with the Fed and remove the U.S. Treasury’s stake, which it had received as part of the bail-out.
AIG has since raised $37 billion from the sale of Alico, its foreign life insurance company, which was sold to MetLife, and the initial public offering of AIA, its Asian life insurance operations.
AIG also is in the process of selling its AIG Star and AIG Edison life insurance companies for $4.3 billion.
AIG is working on a plan that would allow the Treasury to convert its preferred stock to common shares, increasing the government’s ownership to 92 per cent.
The Treasury would then sell most of those shares in a public offering worth up to $20 billion, probably in the first half of 2011. The investment bank Greenhill is advising the Treasury on the sale of its stake.
As part of that deal, AIG would be allowed to raise as much as $3 billion of equity in the market and another $4 billion with Treasury approval.
In December, AIG sold $2 billion in debt, including $500 million in three-year notes and $1.5 billion in 10-year notes, on the private market. The company has also established a $500 million contingent liquidity facility.
The credit facilities announced on Monday will help reassure credit rating agencies that AIG will be able to borrow at sustainable levels in future.
source : cnn