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AIG Signs Agreement With FRBNY

FRBNY would receive preferred interests in the ALICO SPV of $9 billion

American International Group (AIG) has signed an agreement with the Federal Reserve Bank of New York (FRBNY), positioning the American Life Insurance (ALICO) for an initial public offering, depending on market conditions.

As per the deal, AIG would contribute the equity of ALICO to a special purpose vehicle (SPV), in exchange for preferred and common interests in the SPV. The FRBNY would receive preferred interests in the ALICO SPV of $9 billion, which will reduce the debts owed by AIG to the FRBNY. The face value of the preferred interests represents a percentage of the estimated fair market value of ALICO.

AIG will hold the common interests in the ALICO SPV, and will benefit from the fair market value of ALICO in excess of the preferred interests, the company said.

AIG expects this transaction to close in the second half of 2009.