AIG is to receive a revised $150bn US government bail-out package that will allow the troubled insurer to reduce interest payments and give it more time to sell assets and save itself from collapse.
The deal will increase the governmentâ??s aid to the stricken insurer from $123bn to $150bn but leave the federal authorities to reap most of the gains if AIGâ??s troubled assets recover in value.
The new plan â?? which comes less than two months after the Federal Reserve took an 80 per cent stake in AIG in exchange for an $85bn rescue loan â?? was confirmed on Monday.
Under the new plan, which was approved by AIGâ??s board after a weekend of talks between the insurer, the New York Fed and the US Treasury, the government will swap the $85bn two-year loan for a $60bn, five-year loan.
The interest rate of the loan will be reduced from 8.5 per cent over the London interbank borrowing rate to 3 per cent over Libor.
AIG will pay only 75 basis points in interest on the portion of the loan it does not use, instead of 850 basis points currently.
The government will also use a recently announced $700bn facility to buy some $40bn in preferred shares in AIG. The shares will carry an annual interest rate of around 10 per cent.
