The U.S. Treasury Department and the Federal Reserve Board have introduced a modified version of the federal government's assistance to troubled insurer American International Group Inc. (AIG) in order to stabilize the company. Specifically, the government's restructuring is designed to enhance the company's capital and liquidity in order to facilitate the orderly completion of the company's global divestiture program.
Under the new plan, the U.S. Treasury says it will exchange its existing $40 billion cumulative perpetual preferred shares for new preferred shares with revised terms that more closely resemble common equity and thus improve the quality of AIG's equity and its financial leverage. The new terms will provide for non-cumulative dividends and limit AIG's ability to redeem the preferred stock, except with the proceeds from the issuance of equity capital.
The Treasury Department will also create a new equity capital facility, which allows AIG to draw down up to $30 billion as needed over time in exchange for non-cumulative preferred stock to the U.S. Treasury. The Federal Reserve will take several actions relating to the $60 billion revolving credit facility for AIG established by the Federal Reserve Bank of New York in September 2008.
Additional information on the restructured assistance is available at www.ustreas.gov.
SOURCE: U.S. Treasury Department