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Radical AIG Restructuring Proposed: Report

The insurer is in talks with the U.S. about a restructuring that would divide the insurer into at least three government-controlled divisions, a report says, in an attempt to keep the company afloat.
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American International Group

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and U.S. officials are in advanced talks over a restructuring that would divide the insurer into at least three government-controlled divisions in an attempt to keep it afloat, the

Financial Times

reports, citing people close to the situation.

Under the restructuring plan, the government would swap its current 80% holding in the insurer for large stakes in three units -- AIG's Asian operations, its international life insurance business and its U.S. personal lines business. A fourth unit, made up of AIG's other businesses and troubled assets, also could be formed, according to the

Financial Times

.

The U.S., in return, would relax the terms, or even cancel a large portion of a five-year, $60 billion loan to AIG and convert $40 billion worth of preferred stock into shares.

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The final shape of the new rescue attempt could still change as talks between company executives, the U.S.

Treasury

,

Federal Reserve

and credit rating agencies continue.

People close to the situation said AIG could announce the overhaul on Monday, when it is expected to report a fourth-quarter loss of $60 billion. AIG's board is scheduled to meet Sunday, according to the

Financial Times

.

AIG said earlier this week it is discussing "alternative options" with regulators to keep the firm afloat as it navigates through the financial crisis.

This article was written by a staff member of TheStreet.com.