AIG Signs Credit Pact With New York Fed

American International Group Inc., New York, has signed a definitive agreement with the Federal Reserve Bank of New York, for its $85 million revolving credit facility. The line will have a two-year term, with interest based on the three-month London interbank offered rate plus 850 basis points. There is an initial gross commitment fee of 2%. AIG will also pay a commitment fee on undrawn amounts at the rate of 8.5% per year. Borrowings under the facility are conditioned on whether the New York Fed is reasonably satisfied with AIG's corporate governance, among other things. The facility contains customary covenants, including a requirement to maintain a minimum amount of liquidity. AIG chairman and chief executive Edward M. Liddy said the company is "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-capitalized." A pledge of the capital stock and assets of certain of AIG's subsidiaries will secure the facility. AIG will also give preferred stock worth 79.9% of the company's equity to a trust established for the benefit of the U.S. Treasury.