AIG exchange offer for $2.5 billion subordinated debentures oversubscribed at early deadline

By Jennifer Chiou

New York, Nov. 9 - American International Group Inc. announced that because of the high participation in the exchange offer for five series of its junior subordinated debentures through the early participation date, it will not accept any further tenders.

The offer began on Oct. 24 and will expire at 11:59 p.m. ET on Nov. 22. The early participation date was 5 p.m. ET on Nov. 8.

The company is offering new 6.797% euro senior notes due Nov. 15, 2017, new 6.765% sterling senior notes due Nov. 15, 2017 and new 6.82% dollar senior notes due Nov. 15, 2037 in exchange for up to $2.5 billion of the outstanding debentures.

AIG accepted the following:

• All €590.95 million of tenders for its €1 billion of 4.875% series A-3 debentures with a priority level of one and a consideration of €712.50 of euro notes per €1,000 principal amount;

• All £440.15 million of tenders for its £750 million of 5.75% series A-2 debentures with a priority level of two and a consideration of £735.00 of sterling notes per £1,000 principal amount;

• All $312,419,000 of tenders for its $1 billion of 6.25% series A-1 debentures with a priority level of three and a consideration of $820.00 of dollar notes per $1,000 principal amount;

• £372.3 million of the £699.9 million of tenders for its £900 million of 8.625% series A-8 debentures with a priority level of four and a consideration of £910.00 of sterling notes per £1,000 principal amount; and

• None of the $922,268,000 of tenders for its $4 billion of 8.175% series A-6 debentures with a priority level of five and a consideration of $967.50 of dollar notes per $1,000 principal amount.

All in all, the company will issue €420,975,000 of new notes in exchange for the 4.875% debentures, £323,465,000 of new notes for the 5.75% debentures, $256,161,000 of new notes for the 6.25% debentures and £338,757,000 of new notes for the 8.625% debentures.

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.

The company will also pay accrued interest up to but excluding the settlement date of Nov. 15.

As previously reported, 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 had to tender a minimum of $200,000 of dollar debentures, €150,000 of euro debentures or £150,000 of sterling debentures.

The interest rates of the new notes were set on 9 a.m. ET on Nov. 7. The interest rate is 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.

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