As we previously reported here, on September 16, 2008 the Federal Reserve Bank of New York (“Federal Reserve”) agreed to issue American International Group, Inc. ("AIG") a two year, $85 Billion secured revolving credit facility. On September 23, 2008 AIG announced it signed a definitive agreement with the Federal Reserve with respect to such credit facility.

Under the terms of the agreement, AIG will pay interest at the rate of 8.50% over the 3-month LIBOR. In addition, AIG will be subject to an initial 2% gross commitment fee due on the closing date as well as 8.50% per annum commitment fee on all undrawn funds. AIG will be required to pay back the loan by selling assets and issuing new debt or equity instruments. In exchange for the credit facility, AIG will issue a new series of Convertible Serial Preferred Stock to a trust for the benefit of the United States Treasury (the "Treasury”), which will give the Treasury a 79.9% equity interest in AIG. Such shares will be entitled to the same voting rights as common stock on all matters and will participate in all dividends issued to common stock.

AIG Chairman and Chief Executive Officer Edward Liddy said: “This facility was the company’s best alternative. We are pleased to have finalised the terms of the facility, and are already developing a plan to sell assets, repay the facility and emerge as a smaller but profitable company. Importantly, AIG’s insurance subsidiaries remain strong, liquid and well-capitalised.” For a full copy of the AIG press release on the signing of the definitive agreement, please click here.