mick silver
1st March 2009, 21:42
CHARLOTTE, N.C. - Struggling insurer American International Group Inc. will receive up to $30 billion in additional assistance in the fourth U.S. government rescue of the company, people familiar with the matter said Sunday.
The new infusion is intended to prop up AIG - once the world's largest insurer - as it is expected to announce $60 billion in quarterly losses early Monday, a person said on the condition of anonymity.
The company, which is considered too large to be allowed to fail, previously received about $150 billion in loans from the government, which currently holds an 80-per-cent stake in the company.
Under the new deal, the U.S. Treasury and the Federal Reserve would provide about $30 billion in fresh capital to AIG from the government's Troubled Assets Relief Program, or TARP. The money would be provided as a standby line of equity AIG could tap as its losses mount, the person said.
AIG has already received $40 billion from TARP.
The new plan also calls for the Federal Reserve to take stakes in two international units, the person said.
Instead of paying back $38 billion in cash with interest that it has used from a Federal Reserve credit line, AIG now will repay that amount with equity stakes in Asia-based American International Assurance Co. and American Life Insurance Co., which operates in 50 countries.
The $20 billion to $25 billion remaining on the Federal Reserve credit line will be available for borrowing, the person said.
In order to strengthen the company, AIG also plans to combine its U.S. and foreign property-casualty insurance operations into a new unit, with a new name and separate management, the person said. About 20 per cent of the property-casualty business would be taken public.
To further reduce its debt, AIG will turn $5 billion to $10 billion worth of debt into new securities backed by life insurance assets.
The decision to approve a third revision of the AIG bailout is a continued bet by the federal government that there would be even greater risk to letting AIG fail, a person familiar with the Treasury's decision said Sunday.
Federal officials feared a bankruptcy of AIG could be disastrous for the global economy, which is in worse shape than it was six months ago, the person said, requesting not to be named because the talks are ongoing. Talk of the new rescue package has been going on for several weeks, as the Treasury gained insight of AIG's quarterly performance, the person added.
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The new infusion is intended to prop up AIG - once the world's largest insurer - as it is expected to announce $60 billion in quarterly losses early Monday, a person said on the condition of anonymity.
The company, which is considered too large to be allowed to fail, previously received about $150 billion in loans from the government, which currently holds an 80-per-cent stake in the company.
Under the new deal, the U.S. Treasury and the Federal Reserve would provide about $30 billion in fresh capital to AIG from the government's Troubled Assets Relief Program, or TARP. The money would be provided as a standby line of equity AIG could tap as its losses mount, the person said.
AIG has already received $40 billion from TARP.
The new plan also calls for the Federal Reserve to take stakes in two international units, the person said.
Instead of paying back $38 billion in cash with interest that it has used from a Federal Reserve credit line, AIG now will repay that amount with equity stakes in Asia-based American International Assurance Co. and American Life Insurance Co., which operates in 50 countries.
The $20 billion to $25 billion remaining on the Federal Reserve credit line will be available for borrowing, the person said.
In order to strengthen the company, AIG also plans to combine its U.S. and foreign property-casualty insurance operations into a new unit, with a new name and separate management, the person said. About 20 per cent of the property-casualty business would be taken public.
To further reduce its debt, AIG will turn $5 billion to $10 billion worth of debt into new securities backed by life insurance assets.
The decision to approve a third revision of the AIG bailout is a continued bet by the federal government that there would be even greater risk to letting AIG fail, a person familiar with the Treasury's decision said Sunday.
Federal officials feared a bankruptcy of AIG could be disastrous for the global economy, which is in worse shape than it was six months ago, the person said, requesting not to be named because the talks are ongoing. Talk of the new rescue package has been going on for several weeks, as the Treasury gained insight of AIG's quarterly performance, the person added.
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