U.S. Deducts AIG Bonus Payments From Financial Aid

 

Wednesday, Apr 22,2009, 10:26:41 AM   Click:

NEW YORK, 20 April 2009 (AM Best via COMTEX) - The U.S. Department of Treasury has the money deducted from American International Group Inc paid in controversial retention bonuses in March from 30 billion in additional federal aid designated for AIG, according to regulatory filings by the company.

Treasury deducted $ 165 million in payments to employees of AIG Financial Products in the agreement to add up to $ 30 billion for the federal rescue, bringing the total to $ 182.5 billion in loans and other aid, AIG (NYSE: AIG) has said in filings with the U.S. Securities and Exchange Commission.

The Treasury has committed to provide up to $ 29.84 billion for five years after payment of premiums have been deducted. In return, the credit facility to AIG Trust, which owns all of the federal investment in AIG, will receive 300,000 shares of Series F fixed-rate of noncumulative perpetual preferred shares and one warrant of 3,000 shares.

The terms of the agreement for the sale of securities of several restrictions placed on AIG.

Under the agreement, the Treasury will withdraw its investment if AIG declares bankruptcy protection. The agreement stipulates that the government must remain AIG? S majority. It also limits the AIG? S the ability to repurchase capital stock

It requires AIG to continue to maintain corporate policies by limiting expenditures, lobbying and executive compensation that the insurer has accepted since it first accepted federal assistance in September 2008.

The addition of funding was announced that AIG posted a record $ 61.7 billion in the fourth quarter, the net loss. The federal government originally of $ 85 billion bailout from September to prevent AIG from falling into bankruptcy, receiving a 79.9% stake in the insurer. Later, a $ 150 billion was created to keep the company solvent while it reorganizes and sells assets to repay federal assistance (BestWire, March 2, 2009).

According to AIG, as last week, about 80 billion dollars in federal aid is loans from the federal Troubled Asset Relief Program, firing down from a Federal Reserve-financed facility.

A public and political firestorm that followed reports of bonuses, or maintenance payments made to employees of AIG? S Financial Products division. The unit was responsible for much of the credit default swaps and other derivatives which jeopardize AIG? S solvency when he was unable to respond to tens of billions of dollars in collateral calls after a series of lower rating in September 2008 (BestWire 23 March 2009).

Most of the AIG insurance companies currently have a Best's financial strength rating of A (Excellent) with a negative outlook.

Shares of $ 1.34 by AIG in return for the afternoon April 20, down 17.3% from the close.

(By Alyn Ackermann, senior editor, BestWeek: Alyn.Ackermann @ ambest.com)
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