By Susanna Moon
Chicago, March 19 - American International Group, Inc. said it wrapped its modified Dutch auction tender offers for eight series of securities at 11:59 p.m. ET on March 18.
As of the early deadline, 5 p.m. ET on March 4, holders had tendered $668.7 million, or 10.85%, of the $6,162,600,000 of eligible dollar-denominated securities. The offers began Feb. 19.
AIG also said it will purchase the maximum principal amount of sterling and euro debentures that it can purchase at the prices set forth below for an aggregate purchase price, excluding accrued interest, of $429,821,726.71. The tender offer caps for the dollar notes and the other securities remain unchanged.
The company will accept for purchase all securities tendered at a bid spread equal to or greater than the clearing spread, which results in an aggregate purchase price of about $1.316 billion, including an aggregate of about $32.8 million for accrued interest and distributions, according to a company press release.
"The completion of the tender offers shows that AIG continues to deliver on its capital management goals while illustrating its financial flexibility," Robert H. Benmosche, president and chief executive officer of AIG, said in the release.
Tender offer results
As noted before, the following AIG debentures were covered by one offer. The total purchase price was increased from $408 million and, before that, $325 million:
• £527.7 million of 8.625% series A-8 junior subordinated debentures due May 22, 2018; and
• €750 million of 8% series A-7 junior subordinated debentures due May 22, 2018.
By the end of the offer, holders had tendered £444.2 million of the sterling notes, and the company accepted for purchase £76.7 million of them. Investors tendered €576.2 million of the euro notes, and the company accepted €182.4 million of the notes.
As of the early participation date, holders had tendered £442.4 million, or 83.84%, of the sterling debentures and €575.8 million, or 76.77% of the euro debentures.
The following AIG debentures are covered by a second offer, and their total purchase price will not exceed $650 million:
• $687.6 million of 6.25% series A-1 junior subordinated debentures due March 15, 2037; and
• $4 billion of 8.175% series A-6 junior subordinated debentures due May 15, 2038.
In all, holders had tendered $78.9 million of the series A-1 notes, and the company accepted for purchase all of the tendered notes. Investors tendered $366.4 million of the series A-6 notes, and the company accepted all of those notes as well.
As of the early date, holders had tendered $78.6 million, or 11.43%, of the series A-1 debentures and $365.8 million, or 9.14%, of the series A-6 debentures.
The following securities are covered by a third offer, and their total purchase price will not exceed $275 million:
• $300 million of 8.5% capital trust pass-through securities issued by AG Capital II with a July 1, 2030 call date;
• $500 million of 7.57% capital securities, series A, issued by AG Institutional Capital A with a Dec. 1, 2045 call date;
• $500 million of 8.125% capital securities, series B, issued by AG Institutional Capital B with a March 15, 2046 call date; and
• $175 million of 5.6% senior debentures due July 31, 2097 issued by SunAmerica.
In the end, investors had tendered and the company accepted for purchase $19.3 million of the 8.5% notes, $114.2 million of the 7.57% notes, $29 million of the 8.125% securities and $61.8 million of the 5.6% notes.
As of the early date, holders had tendered $19.3 million, or 6.44%, of the 8.5% securities, $114.22 million, or 22.83%, of the 7.57% securities, $29 million, or 5.8%, of the 8.125% securities and $61.8 million, or 35.29%, of the SunAmerica debentures.
The capital securities were issued by three statutory trusts controlled by SunAmerica Financial Group Inc., a wholly owned subsidiary of AIG, that hold junior subordinated debentures issued by SunAmerica Financial and guaranteed by AIG and senior debentures originally issued by SunAmerica Inc. and assumed by AIG.
If a tender offer was oversubscribed, acceptance of securities was subject to proration.
Hypothetical prices
The company had set the hypothetical purchase prices for the securities based on hypothetical clearing spreads. If no additional tenders were received following the early participation date, the actual clearing spreads would be the same as the hypothetical clearing spreads.
The actual purchase prices will be calculated on the basis of the reference yield plus the actual clearing spreads determined through the modified Dutch auction method.
The reference yield is 3.096% for the dollar-denominated securities, 0.831% for the sterling-denominated securities and 0.377% for the euro-denominated securities. They were set on March 4 using the bid-side price of the 2.75% Treasury due Nov. 15, 2042 for the dollar-denominated securities, the 5% U.K. Gilt Treasury due March 7, 2018 for the sterling-denominated securities and the 4% German Bunds due Jan. 4, 2018 for the euro-denominated securities.
Holders who tendered their securities by the early participation date will receive the total consideration, which will include an early participation amount equal to 5% of par.
The hypothetical total considerations are noted in the table below.
The cash payable to each holder whose securities are accepted for purchase by AIG will include a cash payment representing the accrued interest or distributions on those securities.
The payment date is expected to be March 19 for the dollar-denominated debentures and SunAmerica securities and March 20 for the sterling and euro debentures.
More information
The tender offers were subject to some conditions, but no tender offer was conditioned on the completion of the others.
The joint lead dealer managers were Credit Suisse Securities (USA) LLC (800 820-1653 or 212 538-2147), J.P. Morgan Securities LLC (866 834-4666 or 212 834-2494) and Morgan Stanley & Co. Inc. (800 624-1808 or 212 761-1057). The co-dealer managers were BNP Paribas, HSBC, RBC Capital Markets and Standard Chartered Bank. The junior co-dealer managers were ANZ Securities, Lloyds Securities, nabSecurities, LLC, Santander, Societe Generale and UniCredit Capital Markets.
The information agent and depositary was Global Bondholder Services Corp. (212 430-3774 for banks and brokers; otherwise, 866 470-4100, +001-212-430-3774, aig@gbsc-usa.com or www.gbsc-usa.com/aig).
AIG is an insurance organization based in New York.
AIG tender offers pricing information
Issue Minimum spread Maximum spread Hypothetical spread Hypothetical price
| 8.625% series A-8 debentures | 225 bps | 275 bps | 238 bps | £1,256.13
|
| 8% series A-7 debentures | 315 bps | 365 bps | 328 bps | €1,201.15
|
| 6.25% series A-1 debentures | 230 bps | 260 bps | 230 bps | $1,114.13
|
| 8.175% series A-6 debentures | 250 bps | 280 bps | 250 bps | $1,345.77
|
| 8.5% passthrough securities | 230 bps | 260 bps | 230 bps | $1,345.91
|
| 7.57% capital securities, series A | 260 bps | 290 bps | 260 bps | $1,276.44
|
| 8.125% capital securities, series B | 265 bps | 295 bps | 265 bps | $1,350.13
|
| 5.6% senior debentures | 255 bps | 285 bps | 255 bps | $991.85
|
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