Story updated with a U.S. Treasury statement.

NEW YORK ( TheStreet) -- American International Group ( AIG) shares were halted in late-afternoon trading, after the company announced a restructuring of its plans to repay $70 billion to the Federal Reserve and Treasury Department.

Before the stock was halted, AIG shares had fallen 3.9% to $42.24.

In an 8-K filing with the Securities and Exchange Commission, AIG outlined a complex arrangement that would essentially repay the Fed in full and transfer any remaining debts to the Treasury Department.

Most of the Fed repayment will come in cash from $27 billion in proceeds from the sale of two subsidiaries, AIA and Alico. The Treasury will retain certain rights of control and a large equity stake in the company, which it plans to begin selling to the public as soon as the first quarter.

The transaction will close no later than March 15. At that point, the Treasury's preferred stake will be converted into 1.65 billion shares of common stock and sold to the public in smaller tranches.

In a statement, AIG said the restructured plan "marks an important step forward in our progress toward completely repaying taxpayers. We remain committed to executing the steps and meeting all conditions in the agreement as soon as possible."

The Treasury Department said the revised agreement would "accelerate the repayment of U.S. taxpayer funds."

"Today's announcement is a milestone in the government's long-stated efforts to exit our investments in private companies as soon as practical while protecting taxpayers," said Tim Massad, acting assistant secretary for financial stability. "When all is said and done, we believe taxpayers will recover every dollar invested in AIG and stand a good chance of making a profit."

-- Written by Lauren Tara LaCapra in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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