American International Group Inc. has signed a definitive agreement to accept the $85 billion revolving credit facility from the Federal Reserve.
As a result of the agreement, AIG is suspending dividend payments on its common stock in a move that will help the beleaguered insurer clean up its balance sheet.
In exchange for the bailout package, the government will receive a 79.9% equity stake.
Under the terms of the agreement, the New York-based company will be required to pay interest on the two-year loan at a rate based on the three-month London Interbank Bid Rate plus 8.5%.
AIG will also be required to pay an initial “gross commitment fee” of 2% and a commitment fee on undrawn amounts of 8.5% per year.
“We are pleased to have finalized the terms of the facility, and are already developing a plan to sell assets, repay the facility and emerge as a smaller but profitable company,” chairman and chief executive Edward M. Liddy said in a statement.
The insurer had paid a quarterly dividend of 22 cents per share on Sept. 3.
Shares of AIG were down 63 cents, or 12.6%, to $4.37 at 12:45 p.m. ET.
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