Precisely how much does American
International Group (AIG) still have to repay the US
government?
It is a question that is the source
of much confusion, and the beleaguered insurer has acted to put to
an end to speculation with the release of up-to-date Government
Accountability Office (GOA) data.
Go deeper with GlobalData
The answer to the AIG repayment question is
that it remains a vast sum, totalling $83.6 billion. The largest
portion comprises preferred equity capital of $44.8 billion
invested in AIG by the US Treasury Department through its Troubled
Asset Relief Program (TARP).
This total comprises an initial $41.6 billion
invested under the TARP and $3.2 billion of an additional $29.835
billion available to it under the TARP.
The balance of the $83.6 billion comprises
$38.6 billion in loans, interest and fees under a revolving $60
billion, five-year credit facility extended to AIG by the Federal
Reserve Bank of New York (FRBNY).
This debt is set to fall significantly as the
result of an agreement between AIG and the FRBNY, under which AIG
will issue to the FRBNY preferred interests in special purpose
vehicles holding equity in certain AIG subsidiaries in exchange for
a reduction in the outstanding debt under the FRBNY facility. When
these transactions close, AIG’s debt to the FRBNY will be reduced
by $25 billion.
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By GlobalDataRepayable debt is only part of the assistance
extended to AIG which at present totals $120.7 billion.
The additional sum of $37.1 billion comprises
loans extended to two special financing entities created by the
FRBNY in the last quarter of 2008, Maiden Lane II and Maiden Lane
III.
Maiden Lane II received $19.5 billion to
purchase residential mortgage-backed securities held in connection
with AIG’s securities lending programme. As at 2 September 2009,
this loan had a balance of $16.9 billion.
Maiden Lane III received $24.3 billion to
purchase collateralised debt obligations from counterparties to AIG
Financial Products (AIGFP). This AIG unit was a major cause of
AIG’s financial woes, with exposure to credit default swap
contracts of some $440 billion.
As at 2 September 2009, the Maiden Lane III
loan had a balance of $20.2 billion.
