VOL. 123 | NO. 220 | Monday, November 10, 2008
AIG Repays More of $85 Billion Fed Loan
By IEVA M. AUGSTUMS | AP Business Writer
CHARLOTTE, N.C. (AP) - American International Group Inc. reduced the amount it owes the U.S. government by another $2.3 billion as the insurer continues to use the Federal Reserve's new commercial-paper-funding program.
The updated figures come as reports circulated Friday that New York-based AIG may receive less stringent loans terms.
Shares of AIG jumped 28 cents, or nearly 15 percent, to $2.15 in morning trading.
The Wall Street Journal said Friday that federal officials were considering a possible change in the terms of an $85 billion loan made to AIG in September.
AIG spokesman Joseph Norton declined to comment on the report. Federal Reserve Bank of New York spokesman Andrew Williams also declined to comment.
Figures released by the Federal Reserve Thursday showed that as of Wednesday, the government has loaned AIG $81.2 billion under two emergency facilities that were to help the company stave off bankruptcy. That figure was $83.5 billion a week ago.
In September, the Fed said it would provide AIG a two-year, $85 billion loan at an interest rate of about 11.5 percent. In return, the government received a 79.9 percent stake in AIG and the ability to remove senior management.
The central bank later said it would loan the company an additional $37.8 billion.
Last week, AIG said it would be able to access up to an additional $20.9 billion under the new commercial-paper-funding-facility program.
In total, the government has put about $144 billion at AIG's disposal.
By using the commercial-paper program from the Fed, AIG has been able to reduce the amount it had borrowed under the original $85 billion line of credit, Norton said.
As of Wednesday, AIG's borrowings under the $85 billion credit facility totaled $61 billion, down from about $65.5 billion a week ago. The total paydown in the past two weeks totals $9.1 billion.
In addition, AIG has drawn $19.9 billion under the $37.8 billion lending agreement, he said. That amount is up $2.2 billion from a week ago.
Although Norton would not provide details of the amounts borrowed under the new commercial-paper-funding facility, he did say the decrease in the $85 billion facility is "due primarily to AIG's access" to the program.
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.
More details may be announced Monday, when AIG reports third-quarter results.
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