AIG To Repay FRBNY Credit Facility, Has Right To Raise Up To $7 Billion In New Capital Via Primary Offering

AIG has just announced it will use proceeds from the sale of AIA and ALICO to repay the New York Fed's credit facility. Expect to hear more spin of how the New York Fed is getting repaid by AIG (courtesy of money invested in AIG via TARP.). More importantly for shareholders, AIG also announces that it will have the right to: "raise up to $3 billion (and up to an additional $4 billion with the consent
of the Treasury Department) by August 15, 2011 in a registered primary
offering." Presumably this is less than the speculated offering discussed previously by the WSJ.

From a just released 8-K:

Recapitalization Transactions

The Recapitalization transactions, all of which are to occur substantially
simultaneously at the Closing, are to be as follows.
Repayment and Termination of the FRBNY Credit Facility
At the Closing, AIG will repay to the FRBNY in cash all amounts owing under the
FRBNY Credit Facility, and the FRBNY Credit Facility will be terminated. As of
September 30, 2010, the total repayment amount under the FRBNY Credit Facility
was approximately $20 billion. The funds for repayment are to come from the net
cash proceeds from the sale in the initial public offering of 67 percent of AIA
Group Limited ("AIA") ordinary shares and the sale of American Life Insurance
Company ("ALICO"), which closed on October 29, 2010 and November 1, 2010,
respectively. The net cash proceeds from the initial public offering of AIA and
the sale of ALICO totaled approximately $27 billion, a portion of which will be
loaned to AIG (for repayment of the FRBNY Credit Facility), in the form of
secured limited recourse loans, from the special purpose vehicles that hold the
proceeds of the sales of AIA and ALICO (the "SPVs," and such loans, the "SPV
Intercompany Loans"). The remaining net cash proceeds of approximately
$7 billion will be distributed by the SPVs to the FRBNY, in accordance with the
terms of the SPVs' limited liability company agreements.

And also:

• AIG will enter into a registration rights agreement with the Treasury Department
  that grants the Treasury Department registration rights with respect to the
  shares of AIG Common Stock issued at the Closing, including:
• the right to participate in any registered offering of AIG Common Stock by
  AIG after the Closing;

• the right to demand no more than twice in any 12-month period that AIG
  effect a registered marketed offering of its shares after the earlier of
  August 15, 2011 or the date of AIG's completion of a primary equity
  offering;

• the right to engage in at-the-market offerings; and

• the right to approve the terms and conditions of any registered offering in
  which it participates until its ownership falls below 33% of AIG's voting
  securities.

AIG will have the right to

• raise up to $3 billion (and up to an additional $4 billion with the consent
  of the Treasury Department) by August 15, 2011 in a registered primary
  offering; and
  
• in the case that events at AIG's insurance subsidiaries are projected to
  cause the parent company's aggregate liquidity (cash, cash equivalents and
  commitments of credit, but not the Treasury Commitment) to be projected to
  fall below $8 billion within 12 months of the date of determination that
  such an event at an AIG insurance subsidiary has occurred, raise the greater
  of $2 billion and the amount of the deficit;

Comments

[TruthInSunshine]

AIG =

All

In

Government

[SwingForce]

http://www.youtube.com/watch?v=Q0o0l7ekKvk

[plocequ1]

I have read only two words from this post.. AIG and repay and  only one word pops in my mind. TAXPAYER.

[Arius]

Have they no shame???

[economessed]

Dilution is the solution to pollution.

[SwingForce]

http://www.youtube.com/watch?v=4aj_vABphAo

[Spalding_Smailes]

Thanks !!!

http://www.youtube.com/watch?v=ayiU-4emlKg&feature=related

[RobotTrader]

Dip buyers once again victorious.

Banks were huge performers today.

[ZackAttack]

Moral hazard trade is a good bet these days.

Saw lots of lovely double-bottoms in banks of all sizes over the past few weeks.

[fuggetaboutit]

how those dip buyers making out in the muni market?

how bout the long end?

probably isolated to those markets, i mean how could softness there possible spread to the weakest part of the corporate capital structure

[taraxias]

hat tip

[LongSoupLine]

Ok, everybody sing along...

http://www.youtube.com/watch?v=Jdqk6SMfIvA

[fuggetaboutit]

Just to make sure I have the mechanics here

Taxpayers are forced to loan this company money

Fed prints money that doesnt exist, value of AIG assets increase, as does stock price

AIG IPO's specific divisions into the stock market, which is fueled on a daily (if not hourly) basis by the printing of money that doesnt exist

So - to sum it up - taxpayers made a loan they didnt consent to, fed printed money it didnt have, AIG will as a result IPO assets that only have value because of the money printing into a market that is where it is because of money printing

Is this really what's happening here? Is this really how the system works now?

[TruthInSunshine]

You forgot about the part where AIG had made bets on CDS it couldn't cover with firms like Goldman Sachs and their shyster cousins, who probably knew AIG would never be able to cover (refer to Abacus as just one example), so the Fed Reserve & Treasury, acting in the best interests of taxpayers, plowed 180 billion into AIG to ensure it could cover its CDS exposure - as in, pay Goldman and JPM and all others all the money owed on those CDS bets (Goldman, alone, received 14 billion due to the wise decisions of government and The 'Federal Reserve Bank').

Now, initially, there was some talk of forcing creditors to take a haircut. In a bankruptcy situation, creditors are happy to get more than 15 cents on the dollars.

Goldman and JPM and others, who made bets on CDS with AIG, were taking the risk that the 'bookie' may not be able to cover the bets, right?

Isn't that how free markets are supposed to work?

But Bernanke would have NONE of that, and neither would Hank Paulson, who, purely coincidentally - and I'm sure it had NO influence on his actions and decisions as Treasury Secretary at the time - had over 300 million in vested stock options with Goldman Sachs, as its ex-CEO. No haircuts. Goldman and creditors all over get 100 cents on the dollar.

Good stuff!

[Misean]

You forgot the side bets that Goldman Sucks and The Morgue made that AIG would go tits up.  They got paid 100% on those as well.

[TruthInSunshine]

Indeed.

I actually wonder if there weren't derivatives from those derivatives.

I wonder how far along a daisy chain the derivative bet can go.

There must be a mathematical formula that can answer that elegantly...

[ZackAttack]

So what about the other $180+ billion we injected into that POS (while the rat-bastard Cassano walked)?

Did we make a profit on that?

[RobotTrader]

Shortly after the market opened,

Youku.com Inc.
(YOKU 36.73, +23.93, +186.95%)

E-Commerce DangDang Inc. (DANG 30.49, +14.49, +90.56%) ,

[Caviar Emptor]

Yup rang up the DangDong and ran at the close. 

[Caviar Emptor]

Yup rang up the DangDong and ran at the close. 

[kaiserhoff]

Great selection of articles lately in fast moving markets.  Many thanks to Tyler(s), Marla, and the whole team.

Has anyone actually got a handle on the derivatives book of this monster?  Isn't that the $600 Trillion question The Bernanke doesn't want anyone to ask?

[Caviar Emptor]

Welcome back my friends

To the show that never ends

Now I know America is cooked. Recapitalizing AIG is essentially treason. It proves that we learned nothing, first of all. It rewards failure, the exact opposite mechanism that is supposed to be operative in the capitalist system. It prevents the growth of new enterprise, the process of creative destruction is short-circuited. It also teaches those on Wall Street that the government s there to reward failures, calamities, dangerous and fraudulent practices and of course cronyism. It sends the message out to the other countries and to our citizens and children that we have an aristocracy here in America. One that is impenetrable. If you're looking for opportunity, this is not the land. 

Finally it's proof that we are an empire in decline, one on the defensive and quickly sliding down the slippery slope. Hypocrisy reflects failure. We are scared. We are screwed and the irony is it's Americans that broke the system. 

[curbyourrisk]

Being a tax payer, when can I expect my check????

[TruthInSunshine]

Don't worry.

You will be raped...I mean repaid...with interest.

And your social security is absolutely rock solid.

I am 100% certain of this.

[Village Idiot]

...and fuck aig.

[max2205]

AIFUCKEDUP backed by Fedup

[Caviar Emptor]

This is exactly what Dr Frankenstein did when he ran electric current through his corpse and it became his creation! 

"It's ALIVE! It's ALIVE!"

The secret to life itself!!!!!!!!!!

[Sad Sufi]

Tyler,

Consider Glen Greenwald for your blogger role on home page.

He's doing the best writing on Wikileaks, and he's an ace writer who slices up the hypocracy of America's security state from the Left.

http://www.salon.com/news/opinion/glenn_greenwald/

[Cdad]

Allowing this company to recapitalize...it is like being held up in broad daylight while the cops watch.  I don't watch Dancin' with the Stars...but I suppose that is the reason this is happening...right?  Nobody but me and my ZH brothers paying attention?  We elected the Tea Party and so we took care of that...right?

Same reason GM came back public....right?

Same reason Bank of F'n America is still walkin' 'round....

Slow motion train wreck, day after day...and The Bernank is 100% sure.  Really?

I am becoming delirious on a daily basis.  I should probably start watching Dancin' with the Stars...yes, I think I will.  What night is that on now?

[Seasmoke]

i am glad i already have my AIG Man U. Jersey

[JoeStocks]

AIG - I got to thinking this morning. How is AIG going to sell 1.66 billion shares over 18-24 months.

Quote: AIG - The exit plan converts the government’s preferred stock into 1.66 billion common shares for sale on the open market...

For Treasury to break even on its $49.1 billion investment in AIG stock, the shares must be sold for almost $30.

When to Sell?

The U.S. sales will happen in phases over 18 months to two years starting in 2011, said a person with direct knowledge of the Treasury plan. The length of the sale period was meant to avoid flooding the market with AIG shares, said the person, who declined to be identified because details of the strategy are confidential.

There are about 250 trading days each year. Over 2 years that's 500 trading days. The average trading volume for AIG over the last 3 months is about 4 million shares a day. The govt has 1.66 billion shares to sell. That is 3.32 million shares every single trading day for two years.

How is that not going to affect prices downward??

[f16hoser]

Thanx AIG. About time you paid back the Interest Taxpayers paid you for giving back the money the FED gave you to shore up your books! IVY League Fagots.....

Hoser