S&P Assigns Ratings to AIG’s $25.1 Billion Debt Issue

December 13, 2004

Standard & Poor’s Ratings Services announced that it has assigned its “AAA” preliminary senior debt rating, “AA+” preliminary subordinated debt rating, and “AA” preliminary preferred stock rating following American International Group Inc.’s (AIG) $25.1 billion shelf registration of debt securities, preferred and common stock, depositary shares, and other securities.

“The size of the shelf registration is large and marks a shift in strategy to access the spread lending business through an alternative channel,” commented S&P credit analyst Grace Osborne. “AIG intends to use up to $20 billion of the registered securities for offering notes under new institutional and retail debt programs that will replace SunAmerica Life Insurance Co.’s current institutional funding agreement-backed notes program.”

S&P noted that AIG plans to issue the debts securities over the next two years “assuming market conditions are favorable.” It also indicated that “recent funding agreement-backed note issuances have averaged $8 billion-$10 billion over the past three years. The remaining expected issuances from the shelf registration will be used for general corporate purposes in the ordinary course of business.”

S&P said it “believes that it is both customary and prudent for a company of AIG’s size and sophistication to build in flexibility to allow it to take advantage of financing opportunities in this manner. AIG has no current plans to issue equity, capital securities, or any of the other more complex securities included in the registration statement. Standard & Poor’s expects that the proceeds from any drawdown on the shelf registration will not result in increased financial leverage over the short term.”

Although it was not mentioned in S&P’s announcement, AIG also plans to establish a $10 billion euro ($13.2 billion) medium term note program (See IJ Website Dec. 8). The combined proceeds from the two debt issues exceeds $38 billion.

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