Today's LIBOR Rates
1 M |
0.31563 |
 |
3 M |
0.47500 |
|
6 M |
0.68794 |
|
1 YR |
1.06438 |
|
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AIG Dependent on LIBOR-Based Government Credit Line |
November 14, 2009
According to Bloomberg News, AIG—the insurance giant that was one of the most notable casualties of the financial crisis—is still heavily dependent on the Federal Reserve’s Commercial Paper Funding Facility (CPFF), a program that the government hopes to end in February 2010. AIG pays rates on its CPFF borrowing that are based on LIBOR. LIBOR stands for London Interbank Offered Rate and is a filtered average of rates that banks pay each other for unsecured, short-term loans.
Per the Bloomberg article, AIG is accessing other government funds to make payments on the $5.8 billion it owes in the commercial paper program and is exploring replacement financing. The Federal Reserve created CPFF in October 2008 after the failure of Lehman Brothers and the resulting credit freeze that made it difficult for companies to obtain the traditional commercial paper they use to finance daily expenses. Since its massive bailout, AIG has had difficulty securing financing from private sources. It pays a margin of 3% above 3-Month US Dollar LIBOR on its CPFF debt.