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American International Group is close to a deal with the U.S. government that would ease the terms of its bailout, give a further equity commitment and help it pay down debt, a person familiar with the matter said on Saturday.
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The board of the troubled insurer is due to meet on Sunday to vote on the deal, which could be announced when AIG [AIG
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] reports its quarterly results on Monday.
The revised agreement is expected to include an additional $30 billion equity commitment from the government, more lenient terms on an existing preferred investment, and a lower interest rate on an existing $60 billion government credit line, the source said.
AIG will also give the Federal Reserve ownership interests in its Asia-based American Life Insurance (Alico) and American International Assurance Co (AIA) units, the source said.
AIG, once the world's largest insurer, is also expected to post a roughly $60 billion quarterly loss, hurt in large part by writedowns on certain tax assets and commercial mortgage backed securities, the source said.
AIG declined to comment. A key focus of the talks is to avoid a ratings downgrade, which could have serious ramifications on the insurer's liquidity and hurt its businesses. Customers could cancel their insurance policies if a minimum rating is no longer satisfied.
AIG was first rescued in September after bad mortgage bets left it on the verge of collapse. The government stepped in with a $85 billion bailout and subsequently offered additional financing, bringing the support up to $123 billion.
Then in November, the government had to revise its bailout package, raising its aid further, to about $150 billion.
Last year, AIG said it would sell all assets except its U.S. property and casualty business, foreign general insurance and an ownership interest in some foreign life operations, to pay back the government.
While the company has announced some sales, it has been difficult to find buyers and get a good price for assets amid the financial crisis. Credit for deals remains difficult to arrange and many would-be buyers are struggling with their own problems.
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