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AIG convert pref


valuecfa
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Has anyone looked into the AIG-A security? Just looking over Fairholme's 13F and noticed this unusual pref. there.

 

 

There's gotta be a pony in there somewhere!  :)

 

These cumulative interest subordinated convertible debenture stock units mandatory convert into a pony in three installments  ;)

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Prospectus:  http://www.sec.gov/Archives/edgar/data/5272/000095012308005621/y57656b2e424b2.htm

 

 

SECURITY DESCRIPTION:  American Intl Group Inc., Equity Units, stated amount $75 per unit, initially consisting of Corporate Units which include a stock purchase contract and initially, a 1/40, or 2.5%, undivided beneficial ownership interest in (i) the Series B-1 Junior Subordinated Debentures initially due February 15, 2041, (ii) the Series B-2 Junior Subordinated Debentures initially due May 1, 2041 and (iii) the Series B-3 Junior Subordinated Debentures initially due August 1, 2041, each with a principal amount of $1,000. The stock purchase contract requires the holder to purchase for $25 a variable number of shares of American Intl Group Inc. (NYSE: AIG) common stock on each of the three stock purchase dates of February 15, 2011, May 1, 2011 and August 1, 2011 and pays a contract adjustment rates of 2.7067% per $75 equity unit per annum through 2/15/2011, of 2.6450% per $50 equity unit per annum through 5/1/2011, and of 2.6100% per $25 equity unit per annum through 8/1/2011. The stock purchase settlement rate at each of the three stock purchase dates will be 0.54823 shares per unit if the then current market price is equal to or greater than $45.60 and 0.6579 shares per unit if the market price is equal to or less than $38.00. For market prices between those values the settlement rate will be $25 divided by the market value. Prior to the IPO of this security, the last reported sale price of the common stock on 5/12/2008 was $38.37 per share. The debentures are subject to reset and remarketing as specified in the prospectus. The Corporate Units pay quarterly distributions of 8.50% per annum on 2/1, 5/1, 8/1 & 11/1 to holders of record on the record date which is the 15th day of the month prior to the payment date while the securities remain in book-entry form (NOTE: the ex-dividend date is at least 2 business days prior to the record date). Distributions paid by these securities are derived from interest paid on the underlying debt securities and therefore are NOT eligible for the 15% tax rate on dividends and are also NOT eligible for the dividend received deduction for corporate holders. The debentures are pledged as collateral to secure the holder's obligations under the stock purchase contract. The holder has the right at any time to convert the Corporate Units to Treasury Units by the substitution of a specified zero-coupon U.S. Treasury securities for the debentures and to later recreate Corporate Units. The debentures are unsecured, subordinated debt securities and rank junior to the company's unsecured senior indebtedness.

 

Now someone with a brain please translate this into English.  lol  I'm having a hard time understanding it at 2:30 am 

 

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Prospectus:   http://www.sec.gov/Archives/edgar/data/5272/000095012308005621/y57656b2e424b2.htm

 

 

SECURITY DESCRIPTION:  American Intl Group Inc., Equity Units, stated amount $75 per unit, initially consisting of Corporate Units which include a stock purchase contract and initially, a 1/40, or 2.5%, undivided beneficial ownership interest in (i) the Series B-1 Junior Subordinated Debentures initially due February 15, 2041, (ii) the Series B-2 Junior Subordinated Debentures initially due May 1, 2041 and (iii) the Series B-3 Junior Subordinated Debentures initially due August 1, 2041, each with a principal amount of $1,000. The stock purchase contract requires the holder to purchase for $25 a variable number of shares of American Intl Group Inc. (NYSE: AIG) common stock on each of the three stock purchase dates of February 15, 2011, May 1, 2011 and August 1, 2011 and pays a contract adjustment rates of 2.7067% per $75 equity unit per annum through 2/15/2011, of 2.6450% per $50 equity unit per annum through 5/1/2011, and of 2.6100% per $25 equity unit per annum through 8/1/2011. The stock purchase settlement rate at each of the three stock purchase dates will be 0.54823 shares per unit if the then current market price is equal to or greater than $45.60 and 0.6579 shares per unit if the market price is equal to or less than $38.00. For market prices between those values the settlement rate will be $25 divided by the market value. Prior to the IPO of this security, the last reported sale price of the common stock on 5/12/2008 was $38.37 per share. The debentures are subject to reset and remarketing as specified in the prospectus. The Corporate Units pay quarterly distributions of 8.50% per annum on 2/1, 5/1, 8/1 & 11/1 to holders of record on the record date which is the 15th day of the month prior to the payment date while the securities remain in book-entry form (NOTE: the ex-dividend date is at least 2 business days prior to the record date). Distributions paid by these securities are derived from interest paid on the underlying debt securities and therefore are NOT eligible for the 15% tax rate on dividends and are also NOT eligible for the dividend received deduction for corporate holders. The debentures are pledged as collateral to secure the holder's obligations under the stock purchase contract. The holder has the right at any time to convert the Corporate Units to Treasury Units by the substitution of a specified zero-coupon U.S. Treasury securities for the debentures and to later recreate Corporate Units. The debentures are unsecured, subordinated debt securities and rank junior to the company's unsecured senior indebtedness.

 

Now someone with a brain please translate this into English.  lol   I'm having a hard time understanding it at 2:30 am  

 

 

Greenberg executed some sort of equity forward contract with an investment bank some months ago to sell his AIG shares.  Could this strange security be related to that?

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