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Academic

: Conglomerate

Treasury on How It Will Make Money on AIG

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

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Treasury has taken over even more of AIG, and largely taken over the NY Fed's interest in the firm - which is an interesting story of turf; the Fed doesn't want to own banks, Treasury doesn't quite mind so much. The Department also deployed some TARP funds to do it - this after the expiry of the program was announced and praised. It's all a bit confusing, but Treasury has tried to break it down for you with this table:

Investment	Current Outstanding Investment ($B)	Repayment/Comments
FRBNY Credit Facility	19.2	Will be retired from cash proceeds of AIA IPO and ALICO sale. Note: Amount does not include all accrued interest and fees payable to FRBNY (which, when combined with the remaining $19.2 billion Credit Facility, totals approximately $20 billion). All accrued interest and fees will also be repaid with the cash proceeds of the AIA IPO and the ALICO sale.
FRBNY Special Purpose Vehicles (AIA Aurora LLC and ALICO Holdings LLC)	26.1	As part of the restructuring, AIG will draw up to $22 billion in remaining TARP funds from Treasury to purchase preferred interests in the special purpose vehicles holding AIA and ALICO and Treasury will receive those interests. Including the designated assets detailed in the Agreement in Principle announced by AIG on September 30, the aggregate value of the assets supporting the preferred interests in the special purpose vehicles significantly exceeds the amount of the preferred interests. These assets include the remaining shares of AIA, MetLife equity securities received as part of the ALICO sale, equity interests in Nan Shan, Star Life Insurance, Edison Life Insurance, and ILFC, and the Company's equity interests in the Maiden Lane II and Maiden Lane III. It is expected that proceeds from the monetization of these assets will be used to repay the SPV preferred interests in full.
FRBNY Maiden Lane II LLC (Outstanding Principal on FRBNY Loan)	13.5	The fair value of the assets supporting Maiden Lane II is $16.5 billion. It is expected that the FRBNY loan to this vehicle will be repaid in full.
FRBNY Maiden Lane III LLC (Outstanding Principal on FRBNY Loan)	14.3	The fair value of the assets supporting Maiden Lane III is $23.5 billion. It is expected that the FRBNY loan to this vehicle will be repaid in full.
Treasury Investment to Date	47.5	After the completion of the restructuring of AIG, Treasury will hold 1.655 billion shares of AIG common stock. Based on the market closing price of AIG on October 29, 2010, that common stock has a value of $69.5 billion, which exceeds Treasury's current cash investment of $47.5 billion.
Total Remaining Investment in AIG (FRBNY and Treasury)	120.6