Exclusive: AIG near deal on new terms of bailout

[Joanne98]

NEW YORK (Reuters) - American International Group Inc is close to a deal with the U.S. government that would ease the terms of its bailout, provide a further equity commitment and help it pay down debt, a person familiar with the matter said on Saturday.

The revision would be the latest sign of how federal regulators are having to tweak bailout packages for financial institutions deemed too big to fail as the economy and markets worsen.

The board of the troubled insurer is due to meet on Sunday to vote on the deal, which could be announced when AIG reports its quarterly results on Monday, the source said.

That would be just days after the government agreed to boost its equity stake in Citigroup Inc to as much as 36 percent in a bid to bolster another financial giant that taxpayers had already poured billions of dollars into.

The revised AIG agreement is expected to include an additional equity commitment of about $30 billion, more lenient terms on an existing preferred investment, and a lower interest rate on a $60 billion government credit line, the source said.

The new equity commitment would give AIG the ability to issue preferred stock to the government at a later date, the source said.

The London Interbank Offered Rate floor on the interest rate AIG pays on the government's credit line is expected to be removed under the new terms, which would save the insurer about $1 billion a year, the source said. The company currently pays 3 percentage points above Libor.

AIG will also give the U.S. Federal Reserve ownership interests in American Life Insurance (Alico), which generates more than half of its revenue from Japan, and Hong Kong-based life insurance group American International Assurance Co (AIA) in return for reducing its debt, the source said.

The insurer had been trying to sell Alico and a part of AIA in a bid to raise money to pay back the government.

AIG may also securitize some U.S. life insurance policies and give them to the government to further reduce its debt, the source said.

http://www.reuters.com/article/newsOne/idUSTRE51Q61I20090301

[truebrit71]

1. Used to be a joke about the definition of a boat being a hole in the water into which you poured...

..endless sums of money....It would appear that AIG is the biggest boat in the world...

What a cluster-fuck...

I say let it fail and start all over again...