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Wednesday, September 24, 2008
AIG Takes 2-year $85 Billion Credit Line From New York Fed
Robert Daniel
MarketWatch Pulse
TEL AVIV -- American International Group Inc., the New York insurance giant, definitvely agreed to take a two-year $85 billion revolving-credit facility from the Federal Reserve Bank of New York. "AIG made an exhaustive effort to address its liquidity needs through private-sector financing but was unable to do so in the current environment," Chairman and Chief Executive Edward M. Liddy said in a statement late on Tuesday. "This facility was the company's best alternative." AIG said interest on the credit line will be based on the three-month London interbank offered rate plus 8.5%. The company will pay a commitment fee on the credit line of 2% of the facility on the closing date, AIG said. And AIG will pay a commitment fee of 8.5% a year on the amounts it does not draw down. The interest and fees will be payable by increasing the balance outstanding, AIG said. AIG said it is required to repay the facility from, among other things, funds from asset sales and from issuance of debt or equity. AIG is "already developing a plan to sell assets, repay the facility and emerge as a smaller but profitable company," Liddy said. "Importantly, AIG's insurance subsidiaries remain strong, liquid and well-capitalized."
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Most folks judge the health of a business by the revenue that comes in through sales. But not all revenue is equal. Companies can grow their sales by buying other companies, which means you don't get a clear view of how the real sales trends are moving.
So, many analysts, particularly those who look at retail, try to gauge what¿s known as "organic" growth, by looking at same-store sales. These are sales only at outlets open more than a year, so the metric can exclude any sales jump that comes from opening new locations. Retailers release same-store sales (which are frequently called "comps" since they're a true comparison from the previous period) every month.
Retail, incidentally, isn't the only industry to look at same-store sales. Hospital companies, also use the metric, to gauge how existing hospitals are performing compared to ones they just built or acquired.
