America's Profit


Overview

In September 2008, AIG experienced serious liquidity issues. In order to ensure AIG could continue to meet its financial obligations, and to avoid the further stress on the troubled global financial markets,  the U.S. Government, through the Federal Reserve Bank of New York (FRBNY) and the U.S. Department of the Treasury (the Treasury), stepped in to help AIG.

In total, the maximum support authorized by the U.S. Government to AIG reached $182.3 billion by the end of 2008.

Since then, through asset sales and other actions by AIG, the Federal Reserve, and the Treasury, America recovered its $182.3 billion plus a combined positive return of $22.7 billion. Beginning in May 2011, the Treasury successfully sold approximately 1.7 billion shares of AIG common stock in six public offerings for total proceeds of approximately $51 billion, including approximately $13 billion purchased by AIG.

Here’s a breakdown of how it all happened. 

U.S. Government Assistance

US Government Support - image


Breakdown of Government Assistance

  • 2008
    • September 16, 2008: The Federal Reserve Bank of New York announces it will provide a two-year, $85 billion secured revolving credit facility to AIG.
    • November 10, 2008: In order to hold residential mortgage-backed securities from AIG life and retirement services companies and collateralized debt obligations from counterparties of AIG Financial Products Corp., AIG and the FRBNY establish the Maiden Lane II and III special purpose vehicles (SPVs), respectively. AIG provides $1 billion in subordinated funding and the FRBNY provides up to $22.5 billion in senior funding for Maiden Lane II.  AIG provides up to $5 billion in subordinated funding and the FRBNY provides up to $30 billion in senior funding to Maiden Lane III.
    • November 25, 2008: The Treasury invests an additional $40 billion under the Troubled Asset Relief Program in AIG through the purchase of AIG preferred stock.  AIG uses the proceeds to reduce its outstanding debt with the FRBNY from $85 billion to $60 billion.
  • 2009
    • March 2, 2009: AIG, the Treasury, and the FRBNY announce that the government will provide additional financial assistance to AIG. They also announce plans to restructure existing assistance by creating additional SPVs, to hold AIG’s AIA and ALICO subsidiaries as collateral to reduce debt owed to FRBNY.  When the SPVs are created on October 3, 2009, the debt owed to the FRBNY is reduced by $25 billion.

Repayment Progress

  • 2010
    • September 30, 2010: AIG enters into an agreement-in-principle with  the Treasury, the FRBNY, and the AIG Credit Facility Trust designed to repay AIG’s obligations to U.S. taxpayers, and to position AIG as strong, independent, and worthy of investor confidence.
          
      The plan involves three key components:
           - Repaying and terminating the FRBNY credit facility with AIG.
           - Repaying the AIA and ALICO SPVs.
           - Exchanging the $49.1 billion of preferred shares held by the AIG Credit Facility Trust for approximately 1.655 billion shares of AIG common stock and, therefore, eliminating the U.S. Government’s TARP assistance to AIG.
    • November 1, 2010: AIG announces that it has raised nearly $37 billion to repay the U.S. Government through its sale of ALICO to MetLife and the public offering of AIA.
  • 2011
    • January 14, 2011: AIG announces that it has executed its recapitalization plan with the Treasury, the FRBNY, and the AIG Credit Facility Trust.
          
           - AIG repays in full the approximately $21 billion outstanding balance on the FRBNY credit facility.
           - AIG exchanges various forms of government support for 1.655 billion common shares, resulting in the Treasury owning approximately 92 percent of AIG's common shares.
          
      AIG and the Treasury announce that the Treasury will sell, over time and subject to market conditions, its stake in AIG. AIG is poised to emerge as a financially strong company.
    • February 2, 2011: AIG uses $2.2 billion in proceeds from the sale of AIG Star and Edison to reduce the balances on the AIA and ALICO SPVs.
    • March 8, 2011: After selling MetLife securities acquired as part of its sale of ALICO, AIG uses a portion of the proceeds to pay in full the liquidation preference on the ALICO SPV, and reduce the balance on the AIA SPV to approximately $11.3 billion.
    • May 27, 2011: AIG and the Treasury, as the selling shareholder, hold a registered public offering of AIG common stock. AIG sells 100 million shares, and the Treasury sells 200 million shares, at a price of $29 per share, for proceeds of approximately $8.7 billion.  The sale reduces the Treasury’s stake in AIG from approximately 92 percent to 77 percent.
    • August 18, 2011: AIG sells its Nan Shan unit for $2.2 billion.  Net proceeds from the sale are used to reduce the AIA SPV balance.
    • November 1, 2011: AIG pays down the AIA SPV by approximately $1 billion.
  • 2012
    • February 9, 2012: The Maiden Lane II senior loan is repaid in full.
    • March 7, 2012: AIG uses approximately $6.0 billion from the proceeds of the sale of shares of AIA to reduce the liquidation preference in the AIA SPV.
    • March 8, 2012: The Treasury prices a second stock offering of approximately 207 million shares of AIG common stock at $29 per share.  AIG repurchases approximately 103 million shares as part of the offering.  The offering reduces the Treasury’s ownership stake in AIG to approximately 70 percent from 77 percent.
    • March 15, 2012: AIG uses approximately $1.6 billion of proceeds from the FRBNY final disposition of Maiden Lane II assets to reduce the AIA SPV balance.
    • March 22, 2012: AIG pays $1.5 billion to the Treasury, allowing the Treasury to pay down in full the preferred interests in the AIA SPV one year ahead of schedule. Total outstanding government assistance is lowered 75 percent from 2008.
    • May 10, 2012: The Treasury completes its third sale of AIG common stock, with proceeds of approximately $5.75 billion, reducing the Treasury’s ownership stake in AIG to approximately 61 percent from 70 percent. Total outstanding government assistance is lowered 79 percent from 2008.
    • June 14, 2012: AIG confirms that the outstanding loan by the FRBNY to Maiden Lane III has been fully repaid with interest through the sale of assets in the facility.  This reduces the U.S. government’s total outstanding assistance by 83 percent since 2008.
    • August 8, 2012: The Treasury completes its fourth sale of AIG common stock, with proceeds of approximately $5.75 billion, reducing the Treasury’s ownership stake in AIG to approximately 53 percent from 61 percent. Total outstanding government assistance is lowered over 85 percent from 2008.
    • September 14, 2012: The Treasury completes its fifth sale of AIG common stock, with proceeds of approximately $20.7 billion, reducing the Treasury’s ownership stake in AIG to approximately 15.9 percent from 53 percent. Government commitments are fully recovered, and Treasury and the FRBNY to date have received a combined positive return of approximately $15.1 billion.
    • December 14, 2012: The Treasury completes its sixth sale of AIG common stock, selling its entire stake in AIG, with proceeds of approximately $7.6 billion, marking the full resolution of America’s financial support of AIG. 


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