American International Group Inc., the insurer rescued by the U.S., increased its Federal Reserve borrowing to the highest in five months as it drew about $2.2 billion from a credit line to repay maturing commercial paper.
AIG owed $27 billion on the line late last week, compared with $24.8 billion a week earlier, according to the latest Fed data.
Curzon Funding LLC and Nightingale Finance LLC, vehicles tied to AIG's financial products unit, had $2.3 billion in commercial paper expiring in April, AIG said in a regulatory filing in February. The affiliates, which invested in fixed-income holdings including asset-backed securities, needed to turn to the Fed's commercial paper program after AIG lost access to its usual sources of funding.
As of Friday, "AIG has repaid in full all outstanding commercial paper" under the Fed program, said Mark Herr, a spokesman for AIG. "We continue to make progress in repaying America's taxpayers."
The Fed's commercial paper program, made available to financial and industrial companies after the 2008 collapse of Lehman Brothers roiled money markets, was phased out this year.
AIG's debt on the five-year credit line was about $45 billion in November. The draw was cut by about $25 billion in December when AIG handed over stakes in two non-U.S. life divisions. AIG announced deals in March to sell two non-U.S. life businesses and said proceeds will pay down most of the credit line. AIG expects the deals to be completed by yearend.
AIG separately drew $2.2 billion from a Treasury Department facility in the first quarter to bolster property/casualty units. It used the cash to redeem securities held by insurance subsidiaries, improving liquidity and the risk-based capital ratio, a measure of capital adequacy watched by rating firms and regulators, according to Herr.
AIG, bailed out in September 2008 to prevent a U.S. economic collapse, got a rescue package that included a $60 billion Fed credit line, up to $52.5 billion to buy mortgage-backed securities owned or backed by AIG and a Treasury investment of as much as $69.8 billion in two facilities. AIG owes more than $45 billion to the Treasury.
The Treasury is considering a plan to convert its AIG preferred shares into common stock and sell the holdings on the open market over two years, a person with knowledge of talks with the insurer said last month. If AIG consents and there is sufficient demand, the sales could be announced as early as the fourth quarter, the person said.