The U.S. government plans to scrap its original $123 billion bailout of
American International Group
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
$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
Under the plan, the government receives preferred shares that pay 10% annual interest,
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
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,
reports. AIG planned to unload the unit as soon asthe first quarter of next year, said a source.
This article was written by a staff member of TheStreet.com.