By Angela McDaniels
Tacoma, Wash., Oct. 24 - American International Group Inc. began an exchange offer for five series of its junior subordinated debentures, according to a company filing with the London Stock Exchange.
The company is offering new euro senior notes due Nov. 15, 2017, new sterling senior notes due Nov. 15, 2017 and new dollar senior notes due Nov. 15, 2037 in exchange for up to $2.5 billion of the outstanding debentures.
The debentures eligible for the offer and the total exchange considerations are noted in the table below. The total exchange considerations include an early participation consideration of €40.00, £40.00 or $40.00 for each debenture tendered by the early participation date, which is 5 p.m. ET on Nov. 8.
The company will also pay accrued interest up to but excluding the settlement date.
All debentures that are tendered by the early participation date will have priority over debentures tendered after that time. So if the amount of debentures tendered by the early deadline equals or exceeds the cap, no debentures tendered after the early participation date will be accepted for exchange, even if they have an acceptance priority level of 1.
The offer will expire at 11:59 p.m. ET on Nov. 22.
AIG will issue the new dollar notes in denominations of $150,000 and integral multiples of $1,000 above that, the new euro notes in denominations of €100,000 and integral multiples of €1,000 above that and the new sterling notes in denominations of £100,000 and integral multiples of £1,000 above that.
The new notes issued to an eligible holder will be rounded down to the nearest authorized denomination, and a cash payment will be made to make up the difference.
In order to participate, holders must tender a minimum of $200,000 of the dollar debentures, €150,000 of the euro debentures or £150,000 of the sterling debentures.
The interest rates of the new notes will be set on 9 a.m. ET on Nov. 7. The interest rate will be 375 basis points over the lesser of the bid-side yield to maturity of the 4.375% Treasury due May 15, 2041 and 3.6% for the dollar notes, 475 bps over the lesser of the mid-market swap rate for euro swap transactions with a maturity of six years and 2.6% for the euro notes and 475 bps over the lesser of the mid-market swap rate for sterling swap transactions with a maturity of six years and 2.5% for the sterling notes.
AIG will not have the right to defer interest on the new notes, and it will not be able to defer principal repayment beyond the stated maturity date.
The new notes are being offered only to qualified institutional buyers as defined in Rule 144A under the Securities Act of 1933 and, outside the United States, to persons other than U.S. persons as defined in Rule 902 under the Securities Act.
AIG is an insurance company based in New York.
AIG exchange offer
| Notes | Amount outstanding | Priority level | Total exchange consideration
|
| 4.875% series A-3 notes | €1 billion | 1 | €712.50 of euro notes
|
| 5.75% series A-2 notes | £750 million | 2 | £735.00 of sterling notes
|
| 6.25% series A-1 notes | $1 billion | 3 | $820.00 of dollar notes
|
| 8.625% series A-8 notes | £900 million | 4 | £910.00 of sterling notes
|
| 8.175% series A-6 notes | $4 billion | 5 | $967.50 of dollar notes
|
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