AIG explains why shareholder approval not obtained for government bailout

AIG issued a press release confirming details of its agreement with the Federal Reserve Bank of New York for the two-year, $85 billion revolving credit facility. Under the agreement, AIG will issue a new series of convertible participating serial preferred stock to a trust that will hold the preferred stock for the benefit of the United States Treasury. The preferred stock will hold 79.9% of the aggregate shareholder voting power in AIG, meaning that the US government controls the company.

The issuance of the preferred stock, which will be convertible into common stock of AIG following a special shareholders meeting to amend AIG’s restated certificate of incorporation, would normally require approval of shareholders according to the Shareholder Approval Policy of the New York Stock Exchange. The Audit Committee of the Board of Directors of AIG determined that delay necessary in securing shareholder approval prior to the issuance of the Preferred Stock would seriously jeopardize the financial viability of AIG. There is an exception provided in the NYSE’s Shareholder Approval Policy for such a situation. The Audit Committee 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.

AIG is writing to all shareholders a letter notifying them of its intention to issue the Preferred Stock without seeking their approval.

AIG said it will proceed to issue the Preferred Stock when it has received all material approvals of governmental authorities required for the issuance.