AIG Posts $1 Billion-Plus Collateral For ETC Funds
Source: http://www.indexuniverse.com/sections/newsinfocus/4705-aig-posts-1-billion-plus-collateral-etc-funds.html?Itemid=3&utm_source=straightstocks.com&utm_medium=sidebar&utm_campaign=rssPosted on Wednesday, October 22nd, 2008 | In Exchange Traded Funds
Move comes after trading halted in London last month after AIG falterd and ETCs backed by the insurer were thrown into doubt.
After trading in more than 100 exchange-traded commodity
funds tied to American International Group was halted last month on the London
Stock Exchange, a new agreement was announced on Tuesday.
London-based ETF Securities, which issued the ETCs, said
that AIG had agreed to post some $1.5 billion in collateral to cover contracts.
ETF Securities has about $6.5 billion in ETC assets, according to published
reports.
ETF Securities told Reuters that about 20% of those ETC assets
were held in funds that were backed by matching contracts guaranteed by AIG.
In September, the U.S. government had to step in with an $85
billion bailout package to rescue the once-mighty insurance conglomerate.
“Going forward, the collateral will be valued each business
day by BNY Mellon utilizing generally recognized pricing information vendors,
subject to an agreed dispute mechanism, and AIG-FP is required to transfer
additional collateral if the value of the collateral in the account falls below
the value of all commodity securities in issue,” ETF Securities added.
It also stressed that AIG has continued to honor all of its obligations with
regard to commodity securities, “including processing all creations and
redemptions in the usual manner and paying all redemptions due on time.”
In addition, ETF Securities said that the Bank of New York
Mellon would serve as collateral manager for the deal. It will hold collateral
paid by AIG in a separate account over which a unit of ETF Securities “may take
control by delivering to BNY a notice of exclusive control,” said the company
in a statement.
ETF Securities will host a conference call on Monday at 9
a.m. in London to discuss details of the collateralization of its ETCs.
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