AIG in $2.5bn debt raise as it acquires Validus

American International Group (AIG) is raising $2.5 billion in debt as it prepares the funding for the acquisition of Bermuda-based Validus Holdings.

In January, AIG unveiled its plan to acquire Validus for an aggregate transaction value of $5.56 billion, funded by cash on hand.

Now, AIG has revealed two debt offerings to finance the transaction. For one, AIG is offering $750 million principal amount of 5.750 percent fixed-to-floating rate series A-9 junior subordinated debentures due 2048. Commencing on April 1, 2028, the junior subordinated debentures will bear interest on their principal amount at an annual rate equal to three-month LIBOR plus 2.868 percent, payable quarterly in arrears on each April 1, July 1, October 1, and January 1, beginning on July 1, 2028.

AIG intends to use the net proceeds of this offering for general corporate purposes, including funding a portion of the consideration for the acquisition of Validus, according to the prospectus. The offering is not contingent on the consummation of the acquisition of Validus.

Separately, AIG is issuing $750 million principal amount of its 4.200 percent notes due 2028 and $1.0 billion principal amount of its 4.750 percent notes due 2048.

The 2028 notes will bear interest at the rate of 4.200 percent per annum, accruing from March 26, 2018 and payable semi-annually in arrears on each April 1 and Oct. 1, beginning on October 1, 2018. The 2048 notes will bear interest at the rate of 4.750 percent per annum, accruing from March 26, 2018 and payable semi-annually in arrears on each April 1 and Oct. 1, beginning on Oct. 1, 2018. The 2028 notes will mature on April 1, 2028. The 2048 notes will mature on April 1, 2048.

Net proceeds to AIG from both notes will be approximately $1.73 billion after deducting the underwriting discounts and commissions and estimated offering expenses payable by AIG. The company intends to use the net proceeds from this offering for general corporate purposes, including funding a portion of the consideration for the acquisition of Validus, according to the prospectus.

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