American International Group Inc. (AIG - Analyst Report) announced modifications in its bank credit facility in order to boost the company’s liability management initiatives.
Accordingly, AIG swapped its 4-year unsecured revolving credit facility worth $4.0 billion, acquired in Oct 2012, with a new 5-year credit facility of $4.0 billion. AIG had about $3.9 billion available at the end of Mar 2014.
Furthermore, the previous facility included letters of credit with $2.0 billion of sublimit, of which $1.9 billion remained at Mar 2014-end. However, the new arrangement comes with flexible terms as the credit facility will now be available both as revolving credit and as letters of credit. This increases the sublimit of the letters of credit from the prior amount of $2.0 billion.
The new credit facility further improves the company’s debt profile by extending the maturity, while also boosting liquidity and core operations. Over the last couple of years, AIG has been raising funds from time to time through notes and stock offerings to improve its maturity profile. The divestment of International Lease Finance Corp. (ILFC) to AerCap Holdings NV (AER - Snapshot Report) last month has further boosted the company’s liquidity and capital flexibility.
Moreover, AIG has strong capital adequacy and operating leverage, along with a healthy financial leverage (debt-to-capital ratio) that improved to 17.3% at 2013-end from 20.5% at 2012-end and about 31% at 2010-end.These factors have supported effective capital deployment, thereby buoying investors’ confidence in the stock as well.
AIG and AerCap have a Zacks Rank #3 (Hold). However, some better-ranked insurers include OneBeacon Insurance Group Ltd. (OB - Snapshot Report) and Old Republic International Corp. (ORI - Snapshot Report), both of which sport a Zacks Rank #1 (Strong Buy).