American International Group (AIG) has agreed to terminate an interest rate swap agreement with Brookfield Asset Management in exchange for a payment of $905m.
The agreement was part of the remaining derivatives portfolio of AIG Financial Products and carried on AIG’s 30 June 2013 balance sheet at $900m.
The settlement will not have any impact on AIG’s profit or loss, while the proceeds of the settlement are expected to contribute towards the continued closure of the remaining derivatives portfolio of AIGFP. AIGFP is a part of Global Capital Markets.
The swap deal was subject to a litigation disclosed earlier in which the parties have agreed to dismiss.
Brookfield Asset Management and Brysons International (together, Brookfield) filed a complaint on September 30, 2009 against AIG and AIGFP in the Southern District of New York.
The company sought a declaration that a 1990 interest rate swap agreement terminated upon the occurrence of certain alleged events and contended constituted defaults under the swap agreement’s standard "bankruptcy" default provision.
Brookfield claims that it is excused from all future payment obligations under the swap agreement on the basis of the purported termination.