AIG To Get $150 Billion Bailout: Reports
November 10, 2008
The U.S. government plans to scrap its original $123 billion bailout of American International Group (AIG) and replace it with a new $150 billion package, according to media reports.
Details of the revised deal could be announced Monday when the company is expected to report third-quarter earnings, the Wall Street Journal reports. Under the terms worked out late Sunday, the government would give AIG more money, including $40 billion from the Treasury's $700 billion Troubled Asset Relief Program. It would also receive less interest than on the bulk of the original loan, while freeing AIG from exposure to some of the risky financial instruments that nearly caused it to file for bankruptcy protection.
The $150 billion in government aid consists of a $60 billion loan, a $40 billion preferred-stock investment and $50 billion in capital to purchase distressed assets, according to the Journal.
Under the plan, the government receives preferred shares that pay 10% annual interest, Bloomberg reports. The U.S. stake in AIG, measured by its common stock, would remain at 79.9%.
The new package follows criticism from some large AIG shareholders of the original rescue plan, which would have required AIG to quickly sell assets in a declining market while also paying steep interest rates on its loans from the government, the Journal reports.
In September, the U.S. government loaned AIG $85 billion to help the giant insurer stave off bankruptcy. It loaned the company another $37.8 billion in October.
Separately, AIG is aiming to sell its 95% stake in Taiwan life insurer Nan Shan Life in a deal that local media estimated would be worth $2 billion to $2.5 billion, Reuters reports. AIG planned to unload the unit as soon as the first quarter of next year, said a source.
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