This is by far the single largest tax cash payment as insurer American International Group Inc. decided to pay $4 billion of U.S. loans to reduce its tax debt. The money was reported to have come from a $4.4 billion worth of debt sales from its investors, $3.9 billion of which will be paid to the Federal Reserve Bank of New York credit facility.
The move was expected to start a faster rate of amortization of a prepaid commitment fee asset that will lead to a pretax charge of around $650 million.
On the other side of the news, the company also won another trial as their fraud case against an AXA SA affiliate was dismissed in court. The lawsuit was said to cost around $34.4 million which was due to an accusation of illegally inducing the affiliate to enter into two reinsurance contracts.
The credit facility said this is just part of the $182.3 billion package that was given to AIG as part of their bail out plan. Aside from that, AIG still owed the credit facility roughly around $25 billion for interest payment on monetized life insurance units. But this is not actually the whole part of the deal as the company has not yet revealed the entire aid agreement.
The $4 billion payment is said to reduce AIG’s debt from $34 billion to $30 billion. This principal balance still excludes additional fees and interest which is expected to increase the outstanding balance even more. Total interest as of June 30 alone has totaled to around 21$ billion.
This balance is said to be the lowest rate that can possibly be given to a company, thanks to the 2009 government aid restructuring.
According to AIG Executive Robert Benmosche, this is a continuing payment progress that their company has every plan of finishing – an assurance that American taxpayers will be repaid with every cent.
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