AIG AND CHARTIS OBTAIN $4.3BN IN CREDIT

AIG took another step toward freeing itself from US government control last week, when it and its Chartis p/c division obtained $4.3bn in bank credit lines. AIG secured two $1.5bn in credit lines, one for three years and the second for a 364-day term, while Chartis signed a one-year, $1.3bn letter-of-credit deal. All three facilities were arranged through JPMorgan Chase, Bank of America and Citigroup, with 33 other banks participating. The three credit lines will kick in once AIG pays off a $21bn credit line from the New York branch of the Federal Reserve. Under a recapitalization plan announced last month, AIG expects to erase that debt during Q1 2011. AIG agreed the new private capital arrangements after selling $2bn of senior unsecured notes and establishing a $500m contingent liquidity facility earlier last month. The new credit lines represent "another important vote of confidence by the market in AIG", said chief executive Robert Benmosche. "We believe we are close enough to completing our recapitalization plan that we can see the finish line". Disclosure of the new facilities on December 27 prompted a 9.3% jump in the value of AIG's shares, which closed at $59.38 in that day's trading. The New York-based group's shared closed the week at $57.62. However, Barron's warned at the weekend that AIG's share price is likely to fall in 2011 as the US government "unloads the $70n of stock it owns" in the company. The paper noted that AIG's stock rose 40% in December after the company reached the recapitalization deal with the US Treasury and the Fed. Barron's said that given Mr Benmosche's projection that the company will earn $6bn to $8bn this year, AIG's shares "ought to trade at around $40". The Treasury expects to post a profit on the bailout of the company if AIG's shares are trading above $30 when the government sells its stake in the company.