AIG Investment Vehicle Is Restructured

Moody's Investors Service announced yesterday that it has affirmed the ratings of New York-based American International Group's structured investment vehicle Nightingale Finance that is based in the United Kingdom's Channel Islands.

Its rating affirmation follows the restructuring of Nightingale by the vehicle's sponsor, Banque AIG. Under that plan the AIG Financial Products Corp. unit will buy $2.2 billion of Nightingale senior debt or replace it with loans.

Structured investment vehicles such as Nightingale use short-term borrowing to invest in higher-yielding securities. The value of Nightingale assets have been weakened by the U.S. mortgage crisis.

The New York-based rating firm said it had affirmed the Aaa and Prime-1 ratings assigned to the medium-term note programs and the Prime-1 rating assigned to the commercial paper programs of Nightingale Finance Limited and Nightingale Finance LLC.

Under the restructuring, commercial paper and medium term notes are fully backed by commitments provided by AIG Financial Products Corp. and AIG FP agreed to purchase Nightingale's commercial paper

and medium term notes under a senior note purchase commitment and to provide other funding through a repo commitment.

The sum of the senior note and repo commitments will equal the outstanding amounts of commercial paper and medium term notes.

Moody's said in its view, any realization of current or future mark-to-market losses will be avoided given the support of AIG FP provided that AIG FP remains a going-concern.

Nightingale managed by AIG-FP Capital Management Limited, an affiliate of AIG FP. QSR Management Limited, a subsidiary of The Bank of New York (Aaa/Prime-1/B plus), acts as administrator for the vehicle.