American International Group has notified shareholders that it is giving the government a 79.9 percent preferred stock interest in the company without obtaining stockholders' approval.
The company agreed Sept. 23 to give the government stock in exchange for an $85 billion loan to help it through its liquidity crisis. The notice to stockholders went out Friday.
The company has signed a credit agreement with the Federal Reserve Bank of New York for a two-year, $85 billion revolving credit facility.
Under the agreement, AIG explained it will issue a new series of convertible participating serial preferred stock to a trust that will hold the stock for the benefit of the United States Treasury.
The government's preferred stock will hold approximately, but not in excess of, 79.9 percent of the aggregate shareholder voting power.
AIG said the issuance of the preferred stock will be convertible into common stock of AIG, following a special shareholders meeting to amend AIG's restated certificate of incorporation.
Normally the credit transaction would require approval of shareholders under the Shareholder Approval Policy of the New York Stock Exchange, AIG said.
It said, however, the AIG board's Audit Committee determined that the delay necessary in securing shareholder approval prior to the issuance of the preferred stock would seriously jeopardize the financial viability of AIG.
Because of that determination, the Audit Committee, pursuant to an exception provided in the NYSE's Shareholder Approval Policy for such a situation, expressly approved AIG's omission to seek the shareholder approval that would otherwise have been required under that policy. The NYSE has accepted AIG's application of the exception, the company said.
AIG said it will proceed to issue the preferred stock when it has received all material approvals of governmental authorities required for the issuance.
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