Bring on tomorrow - AIG.com

ITEM 8 / NOTE 15. DEBT OUTSTANDING.....................................................................................................................................................................................amount of our outstanding Series A-3 Junior Subordinated Debentures for e421 million ($545 million at theDecember 31, 2011 exchange rate) aggregate principal amount of our new 6.797% Euro notes due November 15,2017. This exchange resulted in a pre-tax gain on extinguishment of debt of approximately $484 million, which isreflected in Net loss on extinguishment of debt in the Consolidated Statement of Operations and a deferred gain of$65 million, which will be amortized as a reduction to future interest expense.In connection with the issuance of the eight series of junior subordinated debentures, we had entered intoreplacement capital covenants (the Original RCCs) for the benefit of the holders of ‘‘covered debt’’ (a designatedseries of our notes). The Original RCCs provided that we would not repay, redeem, or purchase the applicable seriesof junior subordinated debentures on or before a specified date, unless we issued certain replacement capitalsecurities. In August 2012, we issued an aggregate of $250 million of 2.375% Subordinated Notes due 2015 (theSubordinated Notes), which upon their issuance became the ‘‘covered debt’’ under the Original RCCs. The holders ofthe newly issued Subordinated Notes, as the holders of the ‘‘covered debt’’ under the Original RCCs, consented toamendments to each of those Original RCCs that deleted all of the covenants that restricted our ability to repay,redeem or purchase the applicable series of the junior subordinated debentures.We have entered into new replacement capital covenants (the New RCCs) for the initial benefit of the holders of theSubordinated Notes, in connection with our 5.75% Series A-2 Junior Subordinated Debentures and our 4.875%Series A-3 Junior Subordinated Debentures. We covenant in each New RCC that, subject to certain exceptions, wewill not repay, redeem or purchase, and that none of our subsidiaries will purchase, the applicable series of juniorsubordinated debentures prior to the scheduled termination date of that New RCC, unless since the date 360 daysprior to the date of that repayment, redemption or purchase, we have received a specified amount of net cashproceeds from the sale of common stock or certain other qualifying securities that have certain characteristics thatare at least as equity-like as the applicable characteristics of the applicable series of junior subordinated debentures,or we or our subsidiaries have issued a specified amount of common stock in connection with the conversion orexchange of certain convertible or exchangeable securities.We may currently redeem our 6.45% Series A-4 Junior Subordinated Debentures and our 7.70% Series A-5 JuniorSubordinated Debentures, in whole or in part, at their respective principal amounts plus accrued and unpaid interestthrough the date of redemption.Liabilities Connected To Trust Preferred Stock..............................................................................................................................................................................................In connection with our acquisition of SunAmerica Financial Group, Inc. (SAFG, Inc.) in 2001, we entered intoarrangements with SAFG, Inc. with respect to outstanding SAFG, Inc. capital securities. In 1996, SAFG, Inc. issuedcapital securities through a trust to institutional investors and funded the trust with SAFG, Inc. junior subordinateddebentures issued to the trust. SAFG, Inc. guaranteed payments to the holders of capital securities only to the extent(i) the trust received payments on the debentures and (ii) these payments were available for the trust to pay toholders of capital securities. In 2001, AIG Parent guaranteed the same payments to the holders of capital securities.Like the SAFG, Inc. guarantee, the AIG Parent guarantee only applies to any payments actually made to the trust inrespect of the debentures. If no payments are made on the debentures, AIG Parent is not required to make anypayments to the trust. AIG Parent also guaranteed the debentures pursuant to a guarantee that is expresslysubordinated to certain SAFG, Inc. senior debt securities. Under the AIG Parent guarantee, AIG Parent is notrequired to make any payments in respect of the debentures if such payment would be prohibited by thesubordination provisions of the debentures. As a result, AIG Parent will never be required to make a payment underits guarantee of the debentures for so long as SAFG, Inc. is prohibited from making a payment on the debentures.At December 31, 2012, the preferred stock outstanding consisted of $300 million liquidation value of 8.5 percentpreferred stock issued by American General Capital II in June 2000, $500 million liquidation value of 8.125 percentpreferred stock issued by American General Institutional Capital B in March 1997 and $500 million liquidation valueof 7.57 percent preferred stock issued by American General Institutional Capital A in December 1996...................................................................................................................................................................................................................................290 AIG 2012 Form 10-K