AIG signs $4.3bn private-sector loan agreements

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AIG received a total bail-out of about $182bn during the financial crisis

Troubled US insurance giant American International Group (AIG) has signed $4.3bn private-sector loan agreements.

It is a further step towards weaning itself off US government support.

Markets saw the loans as further evidence AIG can stand on its own two feet again, sending its share price up more than 9% - the day's biggest gainer on the New York Stock Exchange.

The company was one of the largest victims of the 2008 financial crisis, requiring a rescue totalling $182bn.

'Vote of confidence'

The US Treasury still owns the majority of the insurer, and its stake is planned to rise to over 92%.

The new loan arrangements announced by AIG, which are being provided by 36 different banks, were seen by markets as a further sign that the company can stand on its own two feet again.

"This success is another important vote of confidence by the market in AIG," said its chief executive, Robert Benmosche.

The three credit facilities will become available only once AIG paid off an existing $21bn loan from the Federal Reserve Bank of New York (FRBNY), which it expects to do in the next three months.

The loans will be split into three facilities:

  • $1.5bn 364-day loan
  • $1.5bn three-year loan
  • $1.3bn letter of credit for AIG's property insurance subsidiary, Chartis

It follows a separate $2bn debt sale by the company completed earlier in the month.

Quick recap

AIG announced a recapitalisation plan in September, that is designed to increase its capital buffer against future losses on the insurance contracts it writes, paving the way for the government's exit from the company.

The company will repay its emergency loans from the FRBNY early in the New Year mainly using proceeds from the selloff of its major Asian subsidiary AIA, and life insurance business Alico.

Once the loans are repaid, the US Treasury is expected to begin selling off its enormous $91bn share ownership in the company.

The company will also sell $10bn-15bn of new shares on the stock market in the New Year.

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