AIG, Maiden Lane Will Pay $62 Billion to Settle Derivatives Article

By BHATTIPROLU MURTI American International Group Inc. and a U.S. Federal Reserve financial vehicle agreed to pay $62 billion to settle derivative transactions with 16 investment banks, getting in return securities whose market value had fallen below $30 billion, according to a regulatory filing. The insurer and Maiden Lane III, a Fed vehicle created to bail out AIG, had previously disclosed their plan to settle AIG's credit default swaps, but hadn't disclosed details related to the derivatives' value and the amounts paid to settle obligations to each counterparty. An AIG representative said nobody at the company was immediately available to discuss the disclosure, which was made on Monday in a filing with the U.S. Securities and Exchange Commission. Societe Generale and Goldman Sachs were the biggest beneficiaries. Societe Generale held derivative contracts with a notional value of $16.4 billion, but a negative mark-to-market of $8.4 billion, according to the SEC filing. The French firm initially received nearly $9.6 billion as collateral from AIG, and Maiden Lane made up the difference of nearly $6.9 billion, according to AIG disclosures. Goldman Sachs held derivative contracts with a notional value of $14 billion but a negative mark-to-market of $8 billion. AIG posted collateral of $8.4 billion and Maiden Lane added $5.6 billion to make up the difference. AIG, which to date has received more than $170 billion in federal funds, said Maiden Lane paid a total of more than $27 billion to settle the derivative contracts. AIG Financial Products received an additional $2.5 billion from Maiden Lane, according to an AIG disclosure. The filing to disclose details of the payments follows AIG's weekend release of the list of firms that received the Maiden Lane money. AIG and the Federal Reserve Bank of New York disclosed in November their intention to buy around $70 billion of securities that were, in effect, insured by AIG through credit default swaps. AIG and Maiden Lane settled the swaps by buying the underlying collateralized debt obligations, which were backed by subprime-mortgage bonds, commercial-mortgage loans and other assets. Write to Bhattiprolu Murti at bhattiprolu.murti@dowjones.com