Two major loan facilities that enabled American International Group (AIG) to ride through a Force 5 financial typhoon have been fully repaid, the Federal Reserve Bank of New York (FRBNY) announced late Thursday.
In fact, AIG said in a separate statement, it has calculated that the FRBNY is likely to make up to $6 billion net profit on its $58.12 billion loan to AIG through the two facilities, Maiden Lane II and Maiden Lane III.
The $24.3 billion loaned to AIG in the fall of 2008 through the Maiden Lane II facility was repaid in full in April. The facility was collateralized by $39 billion in residential mortgage-backed securities that were originally collateralized by the reserves of AIG's 13 life insurance subsidiaries.
The latest sales were from a $28.82 loan collateralized by exotic collateralized debt obligations backed by mortgage-backed securities held in the so-called Maiden Lane III facility.
The approximate face value of the securities held in the Maiden Lane III portfolio was $62.1 billion; it reflected markdowns in value AIG had already taken against its earnings.
Maiden Lane III was used to cancel credit-default swaps that AIG had sold to protect counterparties against losses. The insurer needed to be rescued after it was unable to meet collateral calls from banks that included Goldman Sachs Group Inc., Deutsche Bank, Paribas and Societe Generale SA.
