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December 02, 2010 at 11:35 AM
Wednesday brought American International Group (AIG) one step closer to paying off its debt to the federal government after a bond sale that brought in $2 billion. It was the first offering since the company’s bailout in 2008; the sale was split between short-term and longer term notes. One quarter of the bonds, or $500 million, are due in 2014 and pay an interest rate of 3.65%; the other $1.5 billion come due in 2020 and carry an interest rate of 6.4%, as was reported by NU Online News Service.
The release of documents by the Fed at the behest of Congress have given details and insights into just how the bailout worked, how much went where, and how much was still owed. Liquidity was vital at the time the rescue was made, with money not only going to the four firms previously disclosed, but also to foreign banks and American subsidiaries. The Troubled Asset Relief Program (TARP) program put $1.5 trillion of liquidity into the markets at a time when it was desperately needed.
AIG originally had been the recipient of bailout money to the tune of $182 billion, with the government owning approximately 80% of the company as a result of its efforts to save it. Initially the beneficiary of a line of credit for $85 billion in September of 2008, AIG saw a restructuring in November of that year that allowed it to sell off assets at a less frantic pace so that it would be better able to pay down its debt. The Treasury received $40 billion in newly issued stock, and the credit line was reduced from $85 billion to $60 billion. Additional adjustments were made as time went on.
One surprise in the newly released documents had to do with the Term Asset-Backed Securities Loan Facility (TALF), which was designed to encourage lending and bring back private investors. Some of those investors, according to a New York Times report, included funds that bought TALF securities, and the documents revealed that AIG owned large stakes in those funds.
