American International Group (AIG) has agreed to the consensual termination of an interest rate swap agreement with Brookfield Asset Management, in exchange for the payment from Brookfield to AIG of US$905 million.
The swap agreement was part of the remaining derivatives portfolio of AIG Financial Products (AIGFP) and carried on AIG’s June 30, 2013 balance sheet at $900 million, and the settlement is not expected to have an impact on AIG’s profit or loss.
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This swap agreement was subject to previously disclosed litigation which the parties have agreed to dismiss.
The proceeds of the settlement are expected to contribute towards the continued wind down of the remaining derivatives portfolio of AIGFP, which is a part of Global Capital Markets.
The Swap Agreement, which was accounted for in Brookfield’s financial statements as at 30 June 2013 as an approximate US$1.4 billion liability, was subject to litigation that had been pending in the United States District Court for the Southern District of New York and will be dismissed in conjunction with the consensual termination of the Swap Agreement.
Both of the related 25-year interest rate swap agreements were originally executed in 1990 between the firms.
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