American International Group, Inc. (AIG) reported that it will use the proceeds from a U.S. Treasury purchase of some of its preferred stock to reduce what it owes the federal government.
The Treasury bought four million shares of AIG Series D Preferred Stock and a warrant to purchase a number of shares of common stock of AIG equal to 2 percent of the issued and outstanding shares of common stock of AIG on the date of the investment for $40 billion under the U.S. Department of the Treasury’s Troubled Assets Relief Program.
AIG said it will use the proceeds to reduce its outstanding borrowings under the original credit agreement extended to AIG by the Federal Reserve Bank of New York in September. The maximum capacity of that credit agreement will be reduced from $85 billion to $60 billion.
The Series D Preferred Stock, $5 par value per share, will pay a dividend of 10 percent annually. The warrant has a term of 10 years and is exercisable for up to 53,798,766 shares of common stock, at an exercise price equal to the par value of the common stock at time of exercise.
Source: American International Group, Inc.
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