AIG taps $20.9B in additional Fed credit line
Friday October 31, 6:07 pm ET
By Ieva M. Augstums, AP Business Writer
AIG repays some of $85 billion Fed loan after tapping $20.9 billion in additional Fed money
CHARLOTTE, N.C. (AP) -- American International Group Inc. has reduced the amount it owes the U.S. government by $6.8 billion after the insurance company was granted access to the Federal Reserve's new commercial paper program.
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In a regulatory filing Thursday, AIG said it would be able to access up to an additional $20.9 billion under the new program designed to kick-start the flagging market for commercial paper. It used some of the proceeds to pay back part of an $85 billion government loan.
On Monday, the Fed said it would buy highly rated commercial paper with a three-month maturity, a move to bolster the market. Commercial paper consists of short-term, unsecured loans companies get to finance their day-to-day operations.
Figures released by the Federal Reserve Thursday showed that as of Wednesday, the government has loaned AIG $83.5 billion under two emergency facilities that were to help the New York-based insurer stave off bankruptcy. That figure was $90.3 billion a week ago.
In September, the Fed said it would provide AIG a two-year, $85 billion loan, and the central bank said recently it would loan the company an additional $37.8 billion.
In total, the government has put about $144 billion at AIG's disposal.
By tapping the newest source of money from the Fed, AIG was able to reduce the amount it had borrowed under the original $85 billion line of credit, company spokesman Joseph Norton said.
As of Wednesday, AIG's borrowings under the $85 billion credit facility totaled $65.5 billion, down from about $72 billion a week ago.
In addition, AIG has drawn another $17.7 billion under the $37.8 billion lending agreement, he said.
The company has incurred interest and fees of about $331 million so far.
AIG plans to use the newest source of funds for working capital, to refinance existing commercial paper, and to make voluntary prepayments on the $85 billion loan, Norton said.
Such voluntary prepayments would not reduce the total amount of the $85 billion credit line available, he said.
On Oct. 3, AIG said it would sell off certain business units to pay off the $85 billion loan. The company, however, said it plans to retain its U.S. property and casualty and foreign general insurance businesses. It also plans to keep an ownership interest in its foreign life-insurance operations.
Since then, no deals have been announced.
Shares of AIG rose 28 cents, or 17 percent, to close at $1.91 Friday.
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