On the same day that AIG reported a net loss of $24.47 billion, or $9.05/diluted share, for the third quarter of 2008, the Federal Reserve and Treasury Department said they have renegotiated financial support to AIG in a bid the government agencies said is meant “to keep the company strong and facilitate its ability to complete its restructuring process successfully.”
Under the restructuring, AIG will now get $150 billion versus the original $123 billion in Fed money. AIG also now gets a five-year duration, $60 billion loan that would replace the original two-year $85 billion loan. The new loan would have an interest rate of 3% plus LIBOR, versus the old rate of 8.5% plus LIBOR. “Banks were receiving TARP money, which had a lower cost than AIG’s loans. It was only fair that AIG get similar treatment,” according to the law firm Sandler & O’Neill.
According to Sandler & O’Neill, AIG would also get $40 billion of Troubled Asset Relief Plan (TARP) money in preferred shares with a 10% interest rate. The government would keep its 79.9% ownership interest.