Filed Pursuant to Rule 424(b)(5)
Registration Nos. 033-48996
and 033-48996-01
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 19, 2003)
U.S. $50,300,000
(SUBJECT TO REDUCTION)
AVAILABLE PRINCIPAL COMMITMENT
AND
U.S. $723,493.16
(SUBJECT TO REDUCTION)
AVAILABLE INTEREST COMMITMENT
LIQUIDITY FACILITY OBLIGATIONS
OF
AIG LIQUIDITY CORP.
AND
GUARANTEE OBLIGATIONS
OF
AMERICAN INTERNATIONAL GROUP, INC.
IN SUPPORT OF THE PAYMENT OF PURCHASE PRICE
OF CITY OF ALBUQUERQUE NEW MEXICO AIRPORT SUBORDINATE LIEN ADJUSTABLE
TENDER REFUNDING REVENUE BONDS, SERIES 1995
In connection with the replacement of the current liquidity facility in
effect for the 1995 Bonds (as defined herein), AIG Liquidity Corp. is offering
payment obligations under a standby purchase agreement, which we refer to as the
"Liquidity Facility Obligations." The Liquidity Facility Obligations are
unconditionally guaranteed by AIG. The 1995 Bonds bear interest at a variable
weekly rate and are subject to optional and mandatory tender for purchase to
U.S. Bank Trust National Association, as the Tender Agent. We are entering a
standby purchase agreement, which we refer to as the Standby Agreement, under
which we will, subject to certain conditions, purchase the tendered bonds at a
purchase price equal to the aggregate principal amount of the tendered bonds
plus accrued interest to the purchase date.
The Liquidity Facility Obligations under the Standby Agreement and the
unconditional guarantee of AIG (the "Guarantee Obligations" and together with
the Liquidity Facility Obligations the "Obligations") are not being offered
separately from the 1995 Bonds, which are remarketed pursuant to a separate
Official Statement of the City of Albuquerque, New Mexico, which we refer to as
the "Issuer." The Obligations will expire on February 24, 2005 unless extended
or sooner terminated as described in this Prospectus Supplement. The Obligations
are not severable from the 1995 Bonds and may not be separately traded. The 1995
Bonds are the obligations solely of the Issuer and are not issued or guaranteed
by us or AIG. This Prospectus Supplement is being delivered in connection with
the remarketing of the 1995 Bonds after a mandatory tender for purchase under
the bond ordinance, and may also be delivered in connection with a remarketing
of the Bonds purchased by us under the Standby Agreement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE
CITIGROUP
REMARKETING AGENT
The date of this Prospectus Supplement is February 9, 2004.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ATTACHED PROSPECTUS OR INFORMATION CONTAINED IN DOCUMENTS
WHICH YOU ARE REFERRED TO BY THIS PROSPECTUS SUPPLEMENT OR THE ATTACHED
PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE ATTACHED
PROSPECTUS. WE ARE OFFERING TO SELL THE SECURITIES ONLY IN JURISDICTIONS WHERE
OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE ATTACHED PROSPECTUS IS ACCURATE ONLY AS OF THE DATE ON THE
FRONT OF THOSE DOCUMENTS, REGARDLESS OF THE TIME OF DELIVERY OF THE DOCUMENTS OR
ANY SALE OF THE SECURITIES.
TABLE OF CONTENTS
Page
----
Prospectus Supplement
INTRODUCTION...................................... S-1
PLAN OF DISTRIBUTION.............................. S-1
THE BONDS......................................... S-1
STANDBY AGREEMENT................................. S-3
THE AIG GUARANTEE................................. S-6
PROSPECTUS
WHERE YOU CAN FIND MORE
INFORMATION....................................... 3
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE...................................... 3
DESCRIPTION OF THE OBLIGATIONS.................... 5
AIG LIQUIDITY CORP................................ 9
AMERICAN INTERNATIONAL
GROUP, INC........................................ 9
USE OF PROCEEDS................................... 10
PLAN OF DISTRIBUTION.............................. 10
VALIDITY OF OBLIGATIONS........................... 10
EXPERTS........................................... 11
CAUTIONARY STATEMENT PURSUANT
TO THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995................................ 11
INTRODUCTION
This Prospectus Supplement provides you with a summary of information
about the 1995 Bonds and information regarding our Liquidity Facility
Obligations and the Guarantee Obligations of AIG. We are providing Liquidity
Facility Obligations in support of $50,300,000 aggregate principal amount of the
1995 Bonds.
On May 3, 1995, the Issuer issued $67,000,000 aggregate principal
amount of its Airport Subordinate Lien Adjustable Tender Refunding Revenue
Bonds, Series 1995, due July 1, 2014 which we refer to as the 1995 Bonds. The
proceeds were used to redeem previously issued bonds and to pay the expenses of
the bond offering. Owners of the 1995 Bonds have the right to tender, and in
certain cases are required to tender, the 1995 Bonds for purchase to the Tender
Agent. Citigroup Global Markets Inc., the Remarketing Agent, must use its best
efforts to locate investors to purchase the tendered 1995 Bonds.
In 1998, the Issuer entered into a standby purchase agreement with a
commercial bank, which we refer to as the Bank. Under the agreement, the Bank is
required, subject to certain conditions, to provide funds to the Tender Agent
for the purchase of tendered 1995 Bonds that the Remarketing Agent was not able
to sell to new investors.
As is permitted under the Ordinance as defined herein and the standby
purchase agreement with the Bank, the Issuer is entering a replacement standby
agreement with us under which we will be required, subject to certain
conditions, to purchase 1995 Bonds tendered voluntarily by the holders or
tendered pursuant to certain mandatory tender for purchase requirements, in the
event that the Remarketing Agent cannot sell the tendered 1995 Bonds to new
investors.
The Ordinance provides that the replacement of the Bank with AIG-LC and
the registration of our Liquidity Facility Obligations triggers a mandatory
tender for purchase of all of the outstanding 1995 Bonds five business days
before the effectiveness of the Standby Agreement. The Remarketing Agent has
agreed to use its best efforts to resell the Bonds that are subject to such
mandatory tender for purchase.
Our Standby Agreement will become effective February 25, 2004. Any 1995
Bonds tendered for purchase after 4:00 p.m. on February 25, 2004 will be subject
to purchase under the Standby Agreement.
PLAN OF DISTRIBUTION
The Obligations are not being sold separately from the 1995 Bonds,
which are being remarketed pursuant to the Official Statement of the Issuer,
dated April 24, 1995, as supplemented, which we refer to as the Official
Statement. Neither we nor AIG had any role in preparing the Official Statement
and neither we nor AIG undertakes any responsibility with respect to the
accuracy or completeness of the Official Statement or any information set forth
therein.
THE BONDS
The 1995 Bonds were issued on May 3, 1995 pursuant to City Ordinance
Enactment No. 40-1992 of the Albuquerque City Council, referred to herein as the
Ordinance. The 1995 Bonds mature on July 1, 2014 and are subject to redemption
as described below.
The 1995 Bonds bear interest at a weekly interest rate that is adjusted
each week by the Remarketing Agent. The interest rate is set at the rate at
which the Remarketing Agent determines it could sell the 1995 Bonds at a price
of 100% of their principal amount plus any accrued interest. The 1995 Bonds will
not bear an interest rate of more than 15% per annum, except in the case of
Purchased Bonds, which are described in the next section and which may bear a
maximum interest rate of 24% per annum. The Issuer may, subject to certain
conditions specified in the Ordinance, elect to convert the interest rate on the
1995 Bonds to a long-term interest rate that is not adjusted on a weekly basis.
Neither we nor AIG will participate in the determination of either the weekly
interest rate or any applicable long-term interest rate. The Remarketing Agent's
determination of the weekly interest rate and the long-term interest rate is
conclusive and binding upon the Remarketing Agent, the Fiscal Agent, the Tender
Agent, AIG-LC as the Standby Purchaser, the Insurer of the 1995 Bonds, the
Issuer, and the owners of the 1995 Bonds.
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The 1995 Bonds may be redeemed in whole or in part at the option of the
Issuer on any date on which interest is paid on the 1995 Bonds. The redemption
price is 100% of the principal amount of the 1995 Bonds plus accrued interest.
In the event that the Bonds are converted to pay interest at the long-term
interest rate, the Issuer may redeem the 1995 Bonds on the first day that the
bonds are converted to such interest rate at a price of 100% of the principal
amount plus accrued interest, and on such additional dates and for such an
amount as provided in the Ordinance. The 1995 Bonds are also subject to a
sinking fund provision which causes mandatory redemption of a certain principal
amount of the 1995 Bonds on July 1 of each year up to and including 2014.
Interest on the 1995 Bonds is paid out of revenues from the Albuquerque
airport as described in the Official Statement. Such revenues are referred to
herein as the Pledged Revenues.
Payments of principal and interest on the 1995 Bonds are insured by a
municipal bond insurance policy, which we refer to as the Policy, with Ambac
Assurance Corporation, referred to herein as the Insurer, which unconditionally
guarantees scheduled payments of principal (when due at maturity or upon payment
pursuant to the sinking fund provisions in the Ordinance) and of interest on the
1995 Bonds including interest at the Purchased Bond rates, as described below.
The Policy does not guarantee payment of the purchase price of bonds tendered
for purchase.
Neither we nor AIG is responsible for payment of principal of or
interest due on the 1995 Bonds.
PURCHASED BONDS
Any 1995 Bonds purchased by us that are not subsequently remarketed by
the Remarketing Agent are classified as "Purchased Bonds." A Purchased bond
bears interest at a rate determined in accordance with the Standby Agreement
until such bond is sold pursuant to a Remarketing Agent or we or a subsequent
purchaser from us elects not to sell such bonds after the Remarketing Agent has
informed us of a purchaser. The Purchased Bond interest rate will be (a) from
and including the date that the Purchaser shall have purchased such bond to and
including the date thirty (30) days from the date of such purchase, the Federal
Funds Rate plus 1%; (b) from and including the date thirty-one (31) days from
the date that the Purchaser shall have purchased such bond to and including the
end of the period during which we are obligated to purchase bonds under the
Standby Agreement, the Federal Funds Rate plus 2%; or (c) if an event of default
as described in this prospectus supplement shall have occurred and be
continuing, the Federal Funds Rate plus 3%. The interest rate for the Purchased
Bonds shall be equal to 24% if necessary to include the Excess Bond Interest
Amount for the periods as described in the next paragraph. The interest rate on
Purchased Bonds held by us under the Standby Agreement shall not exceed 24%.
In the event that interest on the Purchased Bonds as calculated
pursuant to (a), (b), and (c) above would be greater than 24% in the absence of
the 24% interest rate limit, then the amount of interest that would have accrued
in the absence of the 24% limitation will be considered the Excess Bond Interest
Amount. If the Excess Bond Interest Amount is greater than $0, then the
Purchased Bond will bear an interest rate of 24% until the date on which the
amount of interest accrued at the 24% rate is in excess of the interest that
would be accrued at the interest rate calculated in accordance with (a), (b) or
(c) above, in amount equal to the Excess Bond Interest Amount.
Purchased Bonds will cease to bear interest at the Purchased Bonds
interest rate described in this section when they are sold by us pursuant to a
remarketing of the Purchased Bonds by the Remarketing Agent, or if we or a
subsequent purchaser directly from us elects not to sell the Purchased Bonds
pursuant to a remarketing arrangement by the Remarketing Agent.
THE AIG FINANCIAL PRODUCTS SWAP AGREEMENT
The Issuer has entered into an interest rate swap agreement with AIG
Financial Products Corp., a Delaware corporation, which we refer to as AIGFP.
Under the agreement the Issuer is paying to AIGFP a fixed rate equal to 6.685%
of the outstanding principal amount of the bonds, subject to certain conditions.
AIGFP is paying the Issuer a variable rate equal to the interest on the bonds.
AIGFP's payment
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obligations under the swap agreement are guaranteed by AIG.
STANDBY AGREEMENT
AVAILABLE COMMITMENT; PURCHASE PERIOD
AIG-LC is obligated to make available $51,023,493.16 for purchase of
the 1995 Bonds, $50,300,000 of which is the aggregate principal amount of the
1995 Bonds outstanding, which we refer to as the "Available Principal
Commitment," and $723,493.16 of which is an amount which represents 35 days of
accrued interest on such outstanding 1995 Bonds, which we refer to as the
"Available Interest Commitment." The Available Principal Commitment will be
decreased by (i) the aggregate principal amount of 1995 Bonds that are redeemed
or paid and are no longer outstanding under the Ordinance and (ii) the aggregate
principal amount of 1995 Bonds that we purchase under the Standby Agreement. The
Available Principal Commitment will be increased by (i) the aggregate principal
amount of 1995 Bonds we sell or another holder of Bank Bonds sells through the
Remarketing Agent under the Standby Agreement or (ii) the aggregate principal
amount of 1995 Bonds, which we or another holder of Bank Bonds elects to keep
under the Standby Agreement after receiving notice of successful remarketing by
the Remarketing Agent. The Available Principal Commitment may also be reduced in
connection with certain remedies to the Events of Default specified in this
Prospectus Supplement. The Available Interest Commitment is decreased or
increased corresponding to the decrease or increase in the Available Principle
Commitment.
The obligation of AIG-LC to provide funds to purchase 1995 Bonds
tendered to the Tender Agent will be effective from the date the Standby
Agreement is delivered to the Tender Agent, until the earliest of:
- February 24, 2005 or such later expiration date as may become effective
pursuant to the terms of the Standby Agreement;
- the date we receive a certificate signed by an officer of the Tender
Agent stating that the period during which we are required to purchase
tendered 1995 Bonds has been terminated pursuant to the terms of the
Ordinance because (i) a new standby agreement has been provided under
the Ordinance and as provided in the Standby Agreement; (ii) the 1995
Bonds have been defeased in accordance with the requirements of the
Ordinance; or (iii) no 1995 Bonds remain outstanding;
- the day after we receive notice from an officer of the Tender Agent
that the 1995 Bonds have been converted to a long-term interest rate or
the day after such interest rate goes into effect, whichever occurs
last;
- the close of business on the date that the Issuer provides notice to us
that the Issuer has elected to terminate the Standby Agreement as
permitted under the terms of the Standby Agreement; or
- the date of termination of the Available Principal and Available
Interest Commitments and AIG-LC's obligation to purchase 1995 Bonds due
as a result of an event of default under the Standby Agreement.
We refer to this period as the "Purchase Period." The Purchase Period
will not be extended without our consent.
FUNDING OF PURCHASE OF TENDERED BONDS BY THE TENDER AGENT FOR THE ACCOUNT OF
AIG-LC
No later than 12:00 noon (New York time) on the day after a Bondholder
tenders 1995 Bonds for purchase we will receive notice from the Tender Agent of
such tender that includes the principal amount of the 1995 Bonds tendered for
purchase and the date specified for purchase. No later than 4:00 p.m. (New York
time) on the day before the Tender Agent must purchase bonds that have been
tendered, the Remarketing Agent must inform the Tender Agent of the principal
amount of 1995 Bonds that have been remarketed. No later than 12:00 noon (New
York time) on the business day on which the 1995 Bonds must be purchased by the
Tender Agent, which we refer to as the Purchase Date, the Tender Agent must
provide us with notice of the aggregate purchase price (consisting of the
aggregate principal amount of such 1995 Bonds plus accrued interest) of those
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1995 Bonds that were not sold and therefore must be purchased by us.
After the receipt of such notice, we will, by no later than 3:00 p.m.
(New York time) on the Purchase Date, unless our obligation to purchase
unremarketed 1995 Bonds is suspended or terminated in accordance with the terms
of the Standby Agreement, make available to the Tender Agent in immediately
available funds, the purchase price of such 1995 Bonds.
SALES OF PURCHASED BONDS BY AIG-LC
We may sell Purchased Bonds at any time subject to the terms of the
Standby Agreement. Such sales (other than those following a remarketing of the
Purchased Bonds by the Remarketing Agent) will be made only to our affiliates,
institutional investors or other entities or individuals which customarily
purchase commercial paper or municipal securities in large denominations.
In connection with any sale of Purchased Bonds outside of the
remarketing of the Purchased Bonds by the Remarketing Agent, we must provide the
Tender Agent with the written authorization of the purchaser of such Purchased
Bonds in which the purchaser authorizes the remarketing Agent to sell such bonds
on its behalf, and we must provide notice to the purchaser that such bonds are
not subject to purchase under the Standby Agreement and therefore have no
short-term rating.
SALES OF PURCHASED BONDS BY REMARKETING AGENT
The Remarketing Agent may sell Purchased Bonds received by the Tender
Agent on our behalf (and any subsequent purchaser of such bonds from us)
pursuant to the Ordinance, at a price equal to the aggregate principal amount of
such bonds plus accumulated interest thereon. We and any subsequent purchaser
from us may elect not to sell the Purchased Bonds or any portion of them. After
any such sale by the Remarketing Agent or any election not to sell by us or a
subsequent purchaser, the 1995 Bonds will bear the weekly interest rate as
determined by the Remarketing Agent.
Any Purchased Bonds resold by the Remarketing Agent will again be
subject to purchase under the terms of the Standby Agreement. Upon our receipt
of payment for Purchased Bonds sold by the Remarketing Agent, we must provide
the Tender Agent notice that states the amount the Aggregate Principal
Commitment has increased by the principal amount of the Purchased Bonds for
which we received payment, that the Aggregate Interest Commitment has been
increased accordingly and such bonds may be released.
COMMITMENT FEE
The Issuer has agreed to pay to us a commitment fee under the Standby
Agreement of 0.25% per annum commencing on the date on which the Standby
Agreement is delivered to the Tender Agent and continuing for as long as we are
committed to purchase 1995 Bonds tendered for purchase. The amount of the
commitment fee is calculated based on the average daily amount of the Available
Principal and Available Interest Commitments during the relevant portion of the
Purchase Period. This fee will be paid in immediately available funds in
advance, one business day preceding the beginning of each quarterly period with
respect to such succeeding quarterly period or portion thereof.
EVENTS OF DEFAULT; TERMINATION
Each of the following is an event of default under the Standby
Agreement:
a) any principal or interest due on the 1995 Bonds is not paid by the
Issuer when due and an insurance payment in respect of such principal
or interest is not paid by the Insurer when, as, and in the amounts
required to be paid pursuant to the terms of the Policy;
b) nonpayment of the commitment fee payable under the Standby Agreement
within five Business Days after the Insurer and the Issuer have
received notice from us that the same was not paid when due;
c) nonpayment of any other fees, or any other amount, when due under the
Standby Agreement, if such failure to pay when due shall continue for
seven business days after written notice thereof to the Issuer and the
Insurer by us;
S-4
d) any representation or warranty made by the Issuer under or in
connection with the Standby Agreement or any of the Bond Documents
shall prove to be untrue in any material respect on the date as of
which it was made;
e) the breach by the Issuer of certain covenants or in the Standby
Agreement related to liens, other indebtedness and the agreements
between the airport and certain airlines;
f) a proceeding is instituted in a court having jurisdiction in the
premises seeking an order for relief, rehabilitation, reorganization,
conservation, liquidation or dissolution in respect of the Issuer under
applicable law and such proceeding is not terminated for a period of 60
consecutive days or such court enters an order granting the relief
sought in such proceeding or the Issuer shall institute or take any
corporate action for the purposes of instituting any such proceeding;
or the Issuer shall become insolvent or unable to pay its debts as they
mature or shall commence a voluntary case under applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case
under any such law or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian or
sequestrator (or other similar official) of the Issuer, or for any
substantial part of its property, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
or claims as they become due, or shall take any corporate action in
furtherance of any of the foregoing;
g) the Issuer shall default in any payment of principal of or interest on
any obligation for borrowed money (or of any obligation under
conditional sale or other title retention agreement or of any
obligation secured by purchase money mortgage or of any obligation
under notes payable or drafts accepted representing extensions of
credit) payable from the Pledged Revenues in excess of $10,000,000
beyond any period of grace provided with respect thereto; or (2) the
Issuer shall default in the performance or observance of any other
agreement, term or condition contained in any agreement under which any
such obligation is created and the effect of such event of default is
to cause, or to permit the holder or holders of such obligation (or a
trustee on behalf of such holder or holders) to cause, such obligation
to become due prior to its stated maturity;
h) the failure on the part of the Issuer to perform or observe any other
material term, covenant or agreement contained in the Standby Agreement
or any of the other Bond Documents on its part to be performed or
observed and (a) with respect to any such term, covenant or agreement
contained in the Standby Agreement, any such failure remains unremedied
for 30 days; and (b) with respect to any such term, covenant or
agreement contained in any of the other Bond Documents, any such
failure remains unremedied after any applicable grace period specified
in such Bond Document;
i) the Ordinance shall terminate or any material term thereof shall cease
to be of full force and effect, other than as a result of any
redemption or defeasance in full of the 1995 Bonds;
j) the occurrence of any Event of Default as defined in the Ordinance;
k) the occurrence of an Insurer Event of Insolvency as defined in the
Standby Agreement;
l) the Insurer shall in writing to the Paying Agent claim that the Policy
with respect to the payment of principal of or interest on the Bonds is
not valid and binding on the Insurer, and repudiate its obligations
under the Policy with respect to payment of principal of or interest on
the 1995 Bonds, or the Insurer shall initiate any legal proceedings to
seek an adjudication that the Policy, with respect to the payment of
principal of or interest on the 1995 Bonds, is not valid and binding on
the Insurer; or
m) any governmental authority with jurisdiction to rule on the validity of
the
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Policy shall announce, find or rule that the Policy is not valid and
binding on the Insurer.
n) Any default by the Insurer in making payment when, as and in the
amounts required to be made pursuant to the express terms and
provisions of any other municipal bond insurance policy or surety bond
issued by Insurer; or
o) A downgrade in the long term crediting rating of the Insurer to AA - or
below by Standard and Poor's and Moody's.
"Bond Documents" means the Standby Agreement, the Swap Agreement, the
Tender Agent Agreement and the Liquidity Guaranty Agreement, the Remarketing
Agreement and the Policy.
Our obligation to purchase 1995 Bonds under the Standby Agreement will
be immediately suspended in the event that an event of default listed under
paragraphs (l) or (m) above should occur. We must notify the Tender Agent, the
Issuer and the Remarketing Agent of the suspension promptly upon obtaining
knowledge of such a default event. Failure to provide such notice, however, will
not affect our right to suspend our obligations to purchase the 1995 Bonds. If a
court with valid jurisdiction then issues a non-appealable judgment that the
Policy is not valid then our obligation will be immediately terminated without
notice or demand. Our obligations to purchase tendered 1995 Bonds will be
reinstated in the event that a court with valid jurisdiction issues a judgment
that the Policy is valid and enforceable. If, however, after three years from
the initial suspension of the obligation to purchase bonds, litigation is still
pending and no final non-appealable judgment has been entered by a court with
competent jurisdiction then our obligation to purchase tendered 1995 Bonds will
terminate without notice or demand.
Our obligation to purchase tendered 1995 Bonds under the Standby
Agreement will be immediately terminated without notice or demand if an event of
default listed under paragraphs (a), (k) or (n) above should occur.
In the event of an occurrence of an event of default described in
paragraphs (b), (c) or (o) above, we may give written notice to the Issuer, the
Tender Agent, the Trustee and the Remarketing Agent designating such event as
triggering a mandatory tender of the 1995 Bonds, designating the date on which
our obligations to purchase tendered 1995 Bonds would terminate and requesting a
mandatory tender of the 1995 Bonds. Our obligations under the Standby Agreement
will not terminate before the date of the mandatory tender of the 1995 Bonds.
Upon the occurrence of an Event of Default as specified in clause (d),
(e), (f), (g), (h), (i) or (j) above we shall have all remedies provided at law
or equity, including, without limitation, specific performance; provided,
however, that the Purchaser shall not have the right to terminate its obligation
to purchase Bonds. In the event we are unable to obtain the remedies specified
for specific events of default described above we reserve the right to pursue
any other available remedies, other than acceleration of any payment due under
the Standby Agreement, whether provided by law, equity or the Standby Agreement.
THE AIG GUARANTEE
AIG has issued an unconditional and irrevocable guarantee in favor of the
Issuer and Tender Agent guaranteeing prompt payment of our payment obligations
under the Liquidity Facility Obligations. The Issuer and Tender Agent may
proceed against AIG under the guarantee whether or not it has proceeded against
us with respect to our obligations. AIG's guarantee will apply to any successors
and assigns of the Issuer and Tender Agent and will remain in effect until all
of our applicable obligations have been paid.
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LIQUIDITY FACILITY OBLIGATIONS
AND
CREDIT FACILITY OBLIGATIONS
OF
AIG LIQUIDITY CORP.
AND
GUARANTEE OBLIGATIONS
OF
AMERICAN INTERNATIONAL GROUP, INC.
We may from time to time enter into standby bond purchase agreements
with issuers, ultimate obligors, Trustees or tender agents in respect of one or
more series of variable rate or short-term municipal bonds, referred to as the
Bonds. The Bonds of each series, including any Bonds remarketed by a remarketing
agent as described herein, will be subject, at the option of the holder of the
Bonds, to tender for purchase and, under certain circumstances, will be subject
to mandatory tender for purchase, at the times and on the terms and conditions
set forth in the Indenture for such Bonds. Under the terms of any such standby
bond purchase agreement, referred to as a Standby Agreement, we will be
obligated to purchase tendered Bonds which have not been remarketed by a
remarketing agent as described in, and subject to any conditions described in,
the applicable Prospectus Supplement. Any tendered Bonds so purchased by us
would again be subject to tender for purchase at the option of the holder if
such Bonds are remarketed by the remarketing agent.
Instead of, or in addition to, entering into a Standby Agreement with
respect to a series of Bonds, we may from time to time issue direct-pay letters
of credit, referred to herein as a Letter of Credit, in respect of such series
of Bonds. Each Letter of Credit will be issued in favor of the Trustee under the
Indenture under which the Bonds are issued for the benefit of the holders of the
Bonds. Pursuant to any such Letter of Credit, the Trustee will be authorized to
draw directly on us from time to time to fund payments of principal of and
interest on the Bonds and, in certain cases, to fund the purchase by the tender
agent of tendered Bonds which have not been remarketed by a remarketing agent in
each case as described in, and subject to any conditions described in, the
applicable Prospectus Supplement. In conjunction with issuing a Letter of
Credit, we and the Issuer of the applicable series of Bonds will enter into a
reimbursement agreement under which we will be entitled to reimbursement of all
credit drawings at such times and on such terms as provided in a reimbursement
agreement and described in the applicable Prospectus Supplement.
Our payment obligations under each Standby Agreement or Letter of
Credit will be unconditionally guaranteed pursuant to a general guarantee
relating to all Standby Agreements or letters of credit or a specific guarantee
relating to the relevant Standby Agreement or Letter of Credit issued by
American International Group, Inc., which we refer to herein as AIG.
The Prospectus Supplement with respect to a Standby Agreement or Letter
of Credit and a guarantee will set forth the title of the relevant series of
Bonds, the name of the Issuer and any insurer, a summary of certain terms of the
Bonds relevant to the operation of the Standby Agreement or Letter of Credit and
the guarantee, and specific terms of such Standby Agreement or Letter of Credit
and guarantee, including whether and under what circumstances the obligations
under the Standby Agreement or Letter of Credit and guarantee may be suspended
or terminated.
This Prospectus and the Prospectus Supplement together constitute an
offering of our obligations under the relevant Standby Agreement, which we refer
to as our Liquidity Facility Obligations or the relevant Letter of Credit which
we refer to as the Credit Facility Obligations, and the obligations of AIG under
the relevant Guarantee, which we refer to as our Guarantee Obligations. We will
refer to our Liquidity Facility Obligations, our Credit Facility Obligations and
the Guarantee Obligations as the Obligations.
This Prospectus and the Prospectus Supplement together do not
constitute an offering of the Bonds related to the Obligations, which have been
or will be offered pursuant to a separate offering
document called an Official Statement. We and AIG undertake no responsibility
with respect to the accuracy or completeness of any Official Statement or any
information set forth therein. The Obligations may not be traded separately from
the Bonds to which they relate. This Prospectus and the Prospectus Supplement
may be delivered at the time of initial issuance of the Bonds of a series or the
remarketing thereof in connection with the replacement by the Obligations of
another liquidity facility or credit facility in effect with respect to such
Bonds and, when appropriately supplemented, if required, may also be delivered
in connection with a remarketing of any Bonds purchased by us or any of our
affiliates.
Payment of principal of and interest on the Bonds of a series to which
our Liquidity Facility Obligations relate is solely the obligation of the Issuer
of the Bonds and is not insured or guaranteed by us, AIG or any affiliate of
either us or AIG. Although Credit Facility Obligations issued by us with respect
to a series of Bonds will serve to support payment of principal of and interest
on such Bonds, payment of such amounts will be primarily the obligation of the
Issuer, as described in the Official Statement for such Bonds, notwithstanding
the existence of such Credit Facility Obligations.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
FOR NORTH CAROLINA RESIDENTS ONLY
THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA HAS NOT APPROVED
OR DISAPPROVED OF THE OFFERING, NOR HAS THE COMMISSIONER PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
THIS PROSPECTUS MAY NOT BE DELIVERED UNLESS ACCOMPANIED BY THE PROSPECTUS
SUPPLEMENT.
The date of this Prospectus is September 19, 2003
-2-
NOTICE TO INVESTORS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT OR INFORMATION CONTAINED IN DOCUMENTS WHICH YOU ARE
REFERRED TO BY THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED
IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE ARE OFFERING TO SELL THE
SECURITIES ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS
ACCURATE ONLY AS OF THE DATE ON THE FRONT OF THOSE DOCUMENTS, REGARDLESS OF THE
TIME OF DELIVERY OF THE DOCUMENTS OR ANY SALE OF THE SECURITIES.
WHERE YOU CAN FIND MORE INFORMATION
We are required to file annual, quarterly and current reports, proxy
statements and other information with the SEC. These reports, proxy statements
and other information can be inspected and copied at:
SEC Public Reference Room
450 Fifth Street, N.W.
Washington, D.C. 20549
Please call the SEC at 1-800-SEC-0330 for further information.
AIG's filings are also available to the public through:
- The SEC web site at http://www.sec.gov
- The New York Stock Exchange
20 Broad Street
New York, New York 10005
AIG's common stock is listed on the NYSE under the symbol "AIG."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information AIG
files with the SEC, which means that we can disclose important information to
you by referring you to those documents. When post-effective amendment no. 2 to
the Registration Statement of which this prospectus is a part became effective,
the following documents were incorporated by reference.
- Annual report on Form 10-K for the year ended December 31,
1995.
- Quarterly report on Form 10-Q for the quarter ended March 31,
1996.
All of AIG's filings made with the SEC under Sections 13(a), 13(c), 14,
or 15(d) of the Securities Exchange Act of 1934 since the effective date of
post-effective amendment no. 2 to the Registration Statement have been
incorporated by reference in this prospectus and all of AIG's future filings
with the SEC under such sections will be incorporated by reference until the
termination of the offering of the Obligations. The information incorporated by
reference in this prospectus is considered to be part of this prospectus, and
later information that AIG has filed or files in the future with the SEC will
automatically update and supersede that information as well as the information
included in this prospectus. This Prospectus does not contain all of the
information set forth in the Registration Statement, of which this Prospectus is
a part, and exhibits thereto which AIG-LC and AIG have filed with the Commission
under the Securities Act of 1933, to which reference is hereby made.
-3-
We will provide without charge a copy of these filings, other than any
exhibits unless the exhibits are specifically incorporated by reference into
this prospectus.
Requests for such documents should be directed to AIG's Director of
Investor Relations, 70 Pine Street, New York, New York 10270, telephone (212)
770-6293.
This Prospectus constitutes a prospectus with respect to the
Obligations of AIG-LC and AIG specified in the Prospectus Supplement. No
Registration Statement has been filed under the 1933 Act with respect to the
Bonds specified in the Prospectus Supplement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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DESCRIPTION OF THE OBLIGATIONS
GENERAL
We may enter or issue Standby Agreements or letters of credit from time
to time the obligations of which will be guaranteed by AIG, with respect to one
or more series of Bonds specified in the applicable Prospectus Supplement. The
Bonds of each series and any municipal Bond insurance policy purchased by the
Issuer with respect to such Bonds have been or will be described in a separate
Official Statement of the Issuer. We and AIG undertake no responsibility with
respect to the accuracy or completeness of any Official Statement or any
information set forth therein.
Our obligations under each Standby Agreement or Letter of Credit and
the obligations of AIG under each guarantee will rank equally with all other of
our and AIG's general unsecured and unsubordinated obligations. The Obligations
are not being issued pursuant to an indenture.
In connection with each Standby Agreement or Letter of Credit, AIG will
agree to provide, or cause to be provided, by means of capital contributions,
purchases of assets, loans or otherwise, funds to us to the extent necessary to
enable us to meet our obligations under the Standby Agreement or Letter of
Credit. Any such agreement to provide or cause to be provided funds will be
solely for the benefit of and enforceable by us and AIG.
AIG depends on its subsidiaries for cash flow in the form of loans,
advances and dividends. Some AIG subsidiaries, namely those in the insurance
business, are subject to regulatory restrictions on the amount of dividends
which can be paid to AIG. These restrictions vary by state. For example, unless
permitted by the New York Superintendent of Insurance, general insurance
companies domiciled in New York may not pay dividends to shareholders which in
any twelve month period exceed the lesser of 10 percent of the company's
statutory policyholders' surplus or 100 percent of its "adjusted net investment
income," as defined. Generally, less severe restrictions applicable to both
general and life insurance companies exist in most of the other states in which
AIG's insurance subsidiaries are domiciled. Certain foreign jurisdictions have
restrictions which generally cause only a temporary delay in the remittance of
dividends. There are also various local restrictions limiting cash loans and
advances to AIG by its subsidiaries. Largely as a result of the restrictions,
approximately 72 percent of consolidated capital funds were restricted from
immediate transfer to AIG at December 31, 2002.
Each Standby Agreement or Letter of Credit will be entered into or
issued at the same time of or after the original issuance of the Bonds described
in the Prospectus Supplement, in either case as set forth in the Prospectus
Supplement, and will expire on the stated termination date set forth in the
Prospectus Supplement unless extended or earlier terminated upon the conditions
described in the Prospectus Supplement.
The Prospectus Supplement will describe the specific terms of the
Obligations in respect of which this Prospectus is being delivered, including
among other things: (1) the timing, terms and method of purchase of Bonds to
which the Liquidity Facility Obligations relate under the Standby Agreement; (2)
the timing, terms and method of making credit drawings to which Credit Facility
Obligations relate under the Letter of Credit and the timing, terms and method
of reimbursing us for such credit drawings under the related reimbursement
agreement; (3) whether and under what circumstances such Obligations will be
terminable without, prior to, or after a mandatory tender for purchase or
acceleration of the related Bonds; (4) any limitations on our rights to resell
Bonds we purchase; (5) the commitment fee payable to us; and (6) any other
relevant terms of the Standby Agreement, the Letter of Credit, the reimbursement
agreement and the guarantee, as the case may be. The term of each Standby
Agreement or Letter of Credit shall be set forth in the Prospectus Supplement,
and generally will be at least 360 days, unless the final maturity of the Bonds
occurs prior to the end of such 360 day period, in which case the term of the
Standby Agreement or Letter of Credit would end on the date of such final
maturity of the Bonds as described in the next section of this Prospectus.
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The Prospectus Supplement will also specify the following terms of the
Bonds to which the Obligations relate: (1) the Issuer and title of such Bonds;
(2) the aggregate principal amount of such Bonds; and (3) certain other terms of
the Bonds or any insurance policy relevant to the operation of the Standby
Agreement, the Letter of Credit, the reimbursement agreement or the guarantee.
Payment of principal of and interest on the Bonds of a series to which
our Liquidity Facility Obligations relate is solely the obligation of the Issuer
and is not insured or guaranteed by us, AIG, or any affiliate of us or AIG.
Although Credit Facility Obligations issued by us with respect to a series of
Bonds will serve to support payment of principal of and interest on such Bonds,
payment of such amounts will be primarily the obligation of the Issuer, as
described in the Official Statement for such Bonds, notwithstanding the
existence of such Credit Facility Obligations. Under certain circumstances, the
Obligations with respect to the purchase of Bonds of any series may be
terminated or suspended upon an Event of Default (as defined in the relevant
Standby Agreement or reimbursement agreement and described in the Prospectus
Supplement).
Each holder of Bonds will be responsible for acting individually with
respect to, among other things, the giving of notices, responding to any
requests for consents, waivers or other amendments pertaining to the Bonds,
enforcing covenants and taking action upon a default.
During the period that the Bonds are owned by us or by a qualified
purchaser from us (including AIG), such Bonds will bear interest at a rate based
on a reference rate or an index as described in the Prospectus Supplement,
subject in certain cases to a maximum rate, or will bear interest as otherwise
described in the Prospectus Supplement. We or our affiliates may hedge our
interest rate exposure in connection with Bonds we purchase, by entering into
interest rate swaps or similar transactions that would have the effect of
converting interest on the purchased Bonds into a LIBOR based rate (subject in
certain cases to no such maximum rate or to a different maximum rate). Unless
otherwise set forth in the Prospectus Supplement, the remarketing agent will
have a continuing obligation to use its best efforts to find purchasers for any
Bonds owned by us or a qualified purchaser who purchased the Bonds from us.
The following descriptions under "Tender of Bonds," "The Standby
Agreements," "The Letters of Credit," "Amount of Commitment" and "The
Guarantees" are general in nature and qualified in their entirety by reference
to, and may be superseded to the extent described in, the Prospectus Supplement
relating to any particular series of Bonds.
TENDER OF BONDS
Tender Option
The Bonds of each series will be subject, at the option of the holder
of the Bonds, to tender for purchase with funds available to the tender agent.
The terms of the Bonds of a series may permit such tenders at any time upon
notice or at specified times relating to the reset of the interest rate with
respect to the Bonds of such series. On the date on which the Bonds of any
series are issued and on each interest reset date for such Bonds, in general,
the remarketing agent will determine the interest rate for the Bonds which is
necessary to remarket tendered Bonds at a price equal to 100% of the principal
amount thereof plus any accrued interest. The Bonds will bear interest at such
rate for the next succeeding interest rate period. Tenders of the Bonds will be
made to the tender agent for purchase at a price equal to 100% of the principal
amount thereof plus any accrued interest to the date of tender (the "purchase
price").
Mandatory Tender
Bonds with respect to which the interest rate period has been changed
or which have been converted to a fixed rate may be subject to mandatory tender
to the tender agent for purchase. In addition, the Bonds may be subject to
mandatory tender for purchase immediately prior to the termination or
expiration, and in some circumstances the replacement of the relevant Standby
Agreement or Letter of
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Credit. Unless otherwise provided in the Prospectus Supplement, if such Bonds
are not delivered when due for tender, they will nevertheless be deemed to be
tendered and purchased at the purchase price designated relevant in the
Indenture with funds available to the tender agent.
THE STANDBY AGREEMENTS
The following paragraphs under the caption "The Standby Agreements"
apply to any series of Bonds with respect to which we have entered into a
Standby Agreement.
Method of Purchase of Bonds by AIG-LC
On the purchase date for the Bonds of any series, the tender agent or
the Trustee as set forth in the Prospectus Supplement shall give us notice of
the aggregate purchase price of that portion of the tendered Bonds of such
series that remain unsold. After we receive such notice, we will (unless our
obligations have been terminated or suspended and subject to any conditions,
including the maximum amount we are committed to provide, described in the
Prospectus Supplement) by the time set forth in the Prospectus Supplement, make
the requested amount available to the party so designated in the Prospectus
Supplement, in immediately available funds or such other funds as shall be
permitted as described in the Prospectus Supplement. As soon as practicable
thereafter, but in any event not later than the time set forth in the Prospectus
Supplement on each purchase date, the tender agent will be required under the
applicable Indenture to purchase such Bonds, for our account, at the purchase
price. The tender agent will be required to remit to us such funds which are not
so used to purchase tendered Bonds.
The Indenture will in general provide that if sufficient funds are duly
deposited on such date, then such Bonds shall be deemed to have been purchased
for all purposes under the related Indenture and that thereafter such holder
will have no further rights under the related Indenture, except to receive the
purchase price from the funds so deposited upon surrender thereof. Neither we
nor AIG will have any liability to a holder for the failure by the tender agent
to apply funds received by it to the purchase price of the related Bonds.
Events of Default and Nature of Obligations
Unconditional Obligations
If the Liquidity Facility Obligations are unconditional, as described
in the Prospectus Supplement, the occurrence and continuance of certain Events
of Default (as defined in the Standby Agreement and described in the Prospectus
Supplement) shall, except as otherwise described in the Prospectus Supplement,
give us the right to terminate our obligations under the Standby Agreement upon
written notice to the Issuer and tender agent specifying a date on which the
Standby Agreement will terminate. In such event, a mandatory tender of the Bonds
may take place pursuant to the Indenture prior to the date specified for
termination and we will be obligated, subject to the terms and conditions of the
Standby Agreement and except as otherwise described in the Prospectus
Supplement, to provide funds for the payment of the purchase price of tendered
Bonds that are not remarketed.
Conditional Obligations
If the Liquidity Facility Obligations are conditional, as described in
the Prospectus Supplement, the occurrence and continuance of certain Events of
Default will, except as otherwise described in the Prospectus Supplement, result
in either immediate suspension or termination of our obligations to purchase
without further action by us or give us the right to suspend or terminate its
obligations under the Standby Agreement. In such event, except as otherwise
described in the Prospectus Supplement, either no mandatory tender of Bonds will
take place prior to such a suspension or termination or if a mandatory tender
does occur the Standby Agreement will have terminated prior to the purchase
date. Except as otherwise described in the Prospectus Supplement, neither we nor
AIG will be obligated to provide funds
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for the payment of the purchase price of tendered Bonds during such a suspension
or following such termination.
Obligation of Tender Agent to Obtain Funds Under the
Standby Agreement
The tender agent will be entitled under the Standby Agreement to demand
funds for the payment of purchase price and the Standby Agreement will expressly
provide that the Standby Agreement is for the benefit of the tender agent. The
Indenture will provide that the tender agent is obligated to take such actions
as may be necessary to obtain immediately available funds on each purchase date
under the Standby Agreement sufficient in amount to enable the tender agent to
pay the purchase price on such purchase date.
THE LETTERS OF CREDIT
The following paragraphs under the caption "The Letters of Credit"
apply to any series of Bonds with respect to which AIG-LC has issued a Letter of
Credit.
Method of Payment of Credit Drawings by AIG-LC
The Trustee shall give to us notice of credit drawings from time to
time up to the initial amount stated in the Letter of Credit. After receipt of
such notice, we shall (unless our obligations have been terminated or suspended
and subject to any conditions, including the maximum amount we are obligated to
provide, described in the Prospectus Supplement), by the time set forth in the
Prospectus Supplement, make such amount available to the Trustee, in immediately
available funds or such other funds as shall be permitted as described in the
Prospectus Supplement. The Trustee will apply such credit drawings to pay
principal of and interest on the Bonds or to purchase at the purchase price
tendered Bonds which have not been remarketed by a remarketing agent. If the
credit drawing is made to purchase tendered Bonds, the Trustee will be required
to remit to us such funds which are not so used to purchase tendered Bonds.
Neither we nor AIG will have any liability to a holder for the failure
by the Trustee or any other person to apply funds received by us or AIG under
the Letter of Credit to payments of principal of, interest on or purchase price
of, as the case may be, the related Bonds.
Method of Reimbursement of Credit Drawings
Pursuant to the reimbursement agreement, we will be entitled to
reimbursement by the Issuer of the Bonds of all credit drawings at such times
and on such terms as provided in the reimbursement agreement and described in
the Prospectus Supplement. If any such reimbursement obligation of an Issuer is
not paid on the same day on which credit drawings are made, the Issuer will be
obligated to pay us interest on the unpaid amount thereof.
Events of Default
The default by the Issuer of its obligation to reimburse us for credit
drawings, or the occurrence and continuance of certain other events of default
(as provided in the relevant reimbursement agreement and described in the
Prospectus Supplement), shall, except as otherwise described in the Prospectus
Supplement, give us the right to terminate our obligations under the Letter of
Credit upon written notice to the Issuer or the Trustee specifying a date on
which the Letter of Credit shall terminate. In such event, a mandatory tender or
acceleration of the Bonds may take place pursuant to the Indenture prior to the
date specified for termination and we will be obligated, subject to the terms
and conditions of the Letter of Credit and except as otherwise described in the
Prospectus Supplement, to make credit drawings available to the Trustee for the
acceleration of the Bonds or the payment of the purchase price of tendered
Bonds.
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Obligation of Trustee to Obtain Funds Under the Letter of
Credit
The Trustee will be entitled under the Letter of Credit to draw funds
for the payment of principal of and interest on the Bonds and, in certain cases,
to purchase tendered Bonds which have not been remarketed by a remarketing
agent, and the Letter of Credit will expressly provide that the Letter of Credit
is for the benefit of the Trustee. The Indenture will provide that the Trustee
is obligated to make credit drawings as necessary to obtain immediately
available funds for the payment of principal of and interest on the Bonds or to
purchase tendered Bonds which have not been remarketed by a remarketing agent,
in each case as such amounts become due and payable.
AMOUNT OF COMMITMENT
Except as otherwise described in the Prospectus Supplement, each
Standby Agreement and Letter of Credit will have an initial stated amount which
is equal to the sum of (a) the aggregate principal amount of the Bonds and (b)
an amount at least equal to the interest that would accrue on the Bonds during
the period specified on the Prospectus Supplement, computed as though the Bonds
bore interest at the maximum rate of interest permitted to be borne by the Bonds
for such period as set forth in the related Prospectus Supplement.
Upon the purchase of any Bonds under a Standby Agreement, and upon the
payment and reimbursement of credit drawings under a Letter of Credit, the
initial stated amount described above will be adjusted as described in the
Prospectus Supplement.
THE GUARANTEES
The Liquidity Facility Obligations and Credit Facility Obligations will
be unconditionally guaranteed by AIG pursuant to a guarantee. The applicable
guarantee will terminate upon the termination of our obligations pursuant to the
relevant Standby Agreement or Letter of Credit.
AIG LIQUIDITY CORP.
We were incorporated on June 29, 1992 in the State of Delaware. All
outstanding capital stock of AIG-LC is owned by AIG. AIG-LC's principal
executive offices are located at 50 Danbury Road, Wilton, Connecticut
06897-4444, Telephone No. (203) 222-4700.
Our business consists of providing liquidity for the payment of the
tender price of certain variable rate municipal securities through Standby
Agreements, providing credit support for the payment of principal of, interest
on and tender price of certain variable rate municipal securities through
Standby Agreements, Letters of Credit and certain related activities.
AMERICAN INTERNATIONAL GROUP, INC.
AIG, a Delaware corporation, is a holding company which through its
subsidiaries is engaged in a broad range of insurance and insurance-related
activities in the United States and abroad. AIG's primary activities include
both general and life insurance operations. Other significant activities include
financial services, and retirement savings and asset management.
AIG's principal executive offices are located at 70 Pine Street, New
York, New York 10270, and its telephone number is 212-770-7000.
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The following table sets forth the historical ratios of earnings to
fixed charges of AIG and its consolidated subsidiaries for the periods
indicated:
Six months
Ended
June 30, Year Ended December 31,
-------------- -------------------------------------------
2003 2002 2002 2001 2000 1999 1998
---- ---- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges 4.05 3.97 3.10 2.92 3.59 3.96 3.57
---- ---- ---- ---- ---- ---- ----
The ratios shown are significantly affected as a result of the
inclusion of the fixed charges and operating results of AIG Financial Products
Corp. and its subsidiaries (AIGFP). AIGFP structures borrowings through
guaranteed investment agreements and engages in other complex financial
transactions, including interest rate and currency swaps. In the course of its
business, AIGFP enters into borrowings that are primarily used to purchase
assets that yield rates greater than the rates on the borrowings with the intent
of earning a profit on the spread and to finance the acquisition of securities
utilized to hedge certain transactions. The pro forma ratios of earnings to
fixed charges, which exclude the effects of the operating results of AIGFP, are
6.99 and 6.05 for the second quarter and 6.62 and 6.26 for the first six months
of 2003 and 2002 respectively, and 4.46, 4.16, 5.06, 5.51, and 4.76 for the
years 2002, 2001, 2000, 1999 and 1998, respectively. As AIGFP will continue to
be a subsidiary, AIG expects that these ratios will continue to be lower than
they would be if the fixed charges and operating results of AIGFP were not
included therein.
Excluding $900 million with respect to the World Trade Center and
related losses and $2.02 billion with respect to the acquisition, restructuring
and related charges, the ratio of earnings to fixed charges was 3.62 for 2001.
USE OF PROCEEDS
In consideration for issuing the Liquidity Facility Obligations or the
Credit Facility Obligations, we will receive fees from the Issuer described in
the relevant Prospectus Supplement. We expect that any such fees so received
will be transferred to AIG or a subsidiary of AIG by means of dividends, loans
or otherwise and used by AIG or such subsidiary for general corporate purposes.
Except as otherwise described in the Prospectus Supplement relating to a
particular series of Bonds, AIG will not receive separate fees from the Issuer
of such Bonds in consideration for issuing the Guarantee Obligations.
PLAN OF DISTRIBUTION
The Obligations will be offered from time to time in connection with
the initial issuance of the Bonds of any series or the remarketing thereof in
connection with the replacement by the Obligations of another liquidity facility
or credit facility in effect with respect to such Bonds. The Obligations may
also be offered in connection with Bonds bought by us. The Obligations may not
be traded separately from the Bonds specified in the Prospectus Supplement. Such
Bonds have been or will be offered pursuant to a separate Official Statement
through any underwriters or agents named therein. We and AIG undertake no
responsibility with respect to the accuracy or completeness of any Official
Statement or any information set forth therein.
VALIDITY OF OBLIGATIONS
Unless we state otherwise in any prospectus supplement, the validity of
the securities will be passed upon for us by Sullivan & Cromwell LLP, New York,
New York or by Kathleen E. Shannon, Senior Vice President, Secretary and Deputy
General Counsel of AIG. Partners of Sullivan & Cromwell LLP involved in the
representation of AIG beneficially own approximately 11,360 shares of AIG common
stock. Ms. Shannon is regularly employed by AIG, participates in various AIG
employee benefit plans under which she may receive shares of AIG common stock
and currently beneficially owns less than 1% of the outstanding shares of AIG
common stock.
-10-
EXPERTS
The consolidated financial statements of AIG and its subsidiaries and
the related financial statement schedules included in its Annual Report on Form
10-K for the year ended December 31, 2002, incorporated herein by reference, are
so incorporated in reliance upon the report of PricewaterhouseCoopers,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
We have included or incorporated by reference in this prospectus
statements that may constitute "forward-looking statements" within the meaning
of the safe harbor provisions of the Private Securities Litigation Reform Act
off 1995. These forward-looking statements are not historical facts but instead
represent only our belief regarding future events, many of which, by their
nature, are inherently uncertain and outside of our control. It is possible that
our actual results may differ, possibly materially, from the anticipated results
indicated in these forward-looking statements.
Information regarding important factors that could cause actual results
to differ, perhaps materially, from those in our forward-looking statements is
contained under the caption "Item 7: Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Cautionary Statement Regarding
Forward-Looking Information" in AIG's Annual Report on Form 10-K for the year
ended December 31, 2002, which is incorporated in this prospectus by reference.
See "Where You Can Find More Information" above for information about how to
obtain a copy of this annual report.
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