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AIG Unit to Issue $1.6 Billion in Private MBS

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A subsidiary of American International Group Inc. has agreed to privately securitize $1.6 billion in mortgages — keeping some of the riskiest slices itself.

In a Securities and Exchange Commission filing today, American General Finance Corp. disclosed that it agreed on July 8 to issue American General Mortgage Loan Trust 2009-1 mortgage-backed certificates with an approximate certificate principal balance of $1.6 billion.

Also acting as sellers in the transaction are American General subsidiaries MorEquity Inc., American General Home Equity Inc. and American General Financial Services of Arkansas Inc.

The issuance was a private deal with the initial purchaser, Credit Suisse. PennyMac Loan Services LLC will act as servicer. The certificates won’t be registered under the Securities Act of 1933 and cannot be offered or sold without registration or an applicable exemption from registration requirements.

American General said it will retain subordinated certificates.

After deducting expenses and subject to the final size of the mortgage pool, American General expects to net somewhere between $925 million and $975 million.

“American General Finance Corp. will use the cash proceeds to support its liquidity position and funding needs, including the discharge of approximately $313 million of debt security obligations under an indenture dated Jan.1, 1988 that are due during 2009,” the filing stated.

The deal, subject to customary closing conditions, is expected to close on July 30.

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