(Updated as of March 31, 2010. For more information, click here.)
Total Authorized Assistance: $182.3 Billion
Total Outstanding Assistance: $134.2 billion
Outstanding Debt and Equity Balance Requiring Repayment from AIG: $101.6 billion*
LOANS: The Federal Reserve Bank of New York (FRBNY) provided AIG with a revolving credit facility of up to $60 billion for a five-year period. On December 1, 2009 AIG announced that it had closed two transactions with the FRBNY that reduced the debt AIG owed the FRBNY by $25 billion in exchange for the FRBNY’s acquisition of preferred equity interests in newly formed special purpose vehicles. As a result of these transactions, the total amount available under the facility was reduced from $60 billion to $35 billion. At March 31, 2010, amounts owed under the FRBNY revolving credit facility totaled $27.4 billion, including accrued compounding interest and fees.
NOTE:
At March 31, 2010, AIG had outstanding net borrowings under the credit facility of $21.6 billion, and accrued compounding interest and fees of $5.8 billion.
EQUITY:
The U.S. Treasury has invested $41.6 billion in AIG preferred stock through the TARP program. The Treasury has also provided an equity capital commitment facility of up to $29.835 billion. As of March 31, 2010, AIG had drawn down $7.5 billion of the available $29.835 billion.
PREFERRED INTERESTS IN AIA AND ALICO HELD BY FRBNY: On December 1, 2009 AIG and the FRBNY completed two transactions pursuant to which AIG transferred to the FRBNY preferred equity interests in newly-formed special purpose vehicles (SPVs) in exchange for a $25 billion reduction of the balance outstanding and the maximum credit available under the FRBNY Credit Facility.
COMMERCIAL PAPER:
In October 2008, the FRBNY created a Commercial Paper Funding Facility (CPFF) to provide a liquidity backstop to U.S. issuers of commercial paper. AIG's participation in the CPFF was on the same terms and conditions as other companies that participated in this program. Under the CPFF, the FRBNY purchased commercial paper from participating AIG affiliates. Proceeds from the issuance of the commercial paper were used to refinance AIG's outstanding commercial paper as it matured and to meet other working capital needs. The amount outstanding under the CPFF at March 31, 2010 was approximately $2.3 billion. The FRBNY ceased purchasing commercial paper on February 1, 2010.
GOVERNMENT INVESTMENT IN AIG-RELATED SECURITIES:
The FRBNY made loans totaling approximately $44 billion to two financing entities, Maiden Lane II and Maiden Lane III, to enable them to buy RMBS securities held in connection with AIG's securities lending program and the securities underlying AIGFP's credit default swaps.
* The difference between the $134.2 billion in government assistance outstanding and the $101.6 billion debt and equity balance requiring repayment is attributable to the $32.6 billion outstanding on the Maiden Lane II and III loans as of March 31, 2010.
What Happened? Under AIG's securities lending program, cash collateral was received from borrowers in exchange for loans of securities owned by AIG's insurance company subsidiaries. The cash was invested in fixed income securities, primarily residential mortgage-backed securities (RMBS), to earn a spread. During September 2008, borrowers began in increasing numbers to request a return of their cash collateral. Because of the illiquidity in the market for RMBS, they could not be sold at acceptable prices, and AIG was forced to find alternative sources of cash to meet these requests. As of the end of August 2008, AIG's U.S. securities lending program had approximately $69 billion of borrowings outstanding.
Solution: On December 12, 2008, AIG, certain of AIG's wholly owned U.S. life insurance subsidiaries, and AIG Securities Lending Corp., another AIG subsidiary (the AIG Agent); entered into an Asset Purchase Agreement (the ML II Agreement) with Maiden Lane II LLC (ML II), a Delaware limited liability company whose sole member is the FRBNY. Maiden Lane II received $19.5 billion and used the funds to purchase RMBS held in connection with AIG's securities lending program. In addition to principal repayments, the FRBNY receives interest on the loan at LlBOR plus 1% (paid by proceeds from the RMBS assets). As of March 31, 2010, this loan had a balance of $15.3 billion.
Maiden Lane II received $19.5 billion and used the funds to purchase residential mortgage-backed securities (RMBS) held in connection with AIG's securities lending program. In addition to principal repayments, the FRBNY receives interest on the loan at LIBOR plus 1% (paid by proceeds from the RMBS assets).
What Happened? Throughout the second half of 2008, declines in the fair values of the super senior multi-sector collateralized debt obligation (CDO) securities protected by credit default swaps written by AIG Financial Products Corp. (AIGFP), together with ratings downgrades of the CDO securities, resulted in AIGFP being required to post significant additional collateral. As of the end of August 2008, AIG had posted approximately $19.7 billion of collateral under its super senior credit default swap portfolio.
Solution: On November 25, 2008, AIG entered into a Master Investment and Credit Agreement (the ML III Agreement) with the FRBNY, Maiden Lane III LLC (ML III), and The Bank of New York Mellon, which established arrangements, through ML III, to fund the purchase of the multi-sector CDOs underlying or related to certain credit default swaps and other similar derivative instruments (CDS) written by AIGFP in connection with the termination of such CDS transactions. Concurrently, AIGFP's counterparties to such CDS transactions agreed to terminate those CDS transactions relating to the multi-sector CDOs purchased from them by ML III.
Maiden Lane III received $24.3 billion and used the funds to purchase CDOs from counterparties to AIGFP, an AIG subsidiary, related to credit default swap contracts written by AIGFP, in connection with the termination of such CDS transactions. In addition to principal repayments, the FRBNY receives interest on the loan at LlBOR plus 1% (paid by proceeds from the CDOs). As of March 31, 2010, this loan had a balance of $17.3 billion.