American International Group Inc. (AIG) says its AIG's U.S. 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 Nov. 10.
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%. The purchase price may be increased as a result of the payment of the deferred contingent purchase price described below.
AIG adds that its October securities lending agreement with FRBNY and its U.S. securities lending program have been terminated.