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AIG bailout could exceed $150 billion

Bloomberg News

American International Group Inc., the insurer bailed out by the U.S., may get lower interest rates and more time to repay its debt in a new government rescue package valued at more than $150 billion.

The U.S. will revise the original $85-billion loan that saved the New York-based insurer in September by giving it $40 billion in exchange for preferred shares, and spending $52.5 billion to buy mortgage-backed securities from AIG, said a person familiar with the situation.

The extra funds will help AIG retire part of its credit-default swap portfolio and bolster its securities lending operations, said the person, who declined to be identified because the plan hadn’t been officially announced. AIG is scheduled to disclose third-quarter results today.

The changes may give Chief Executive Edward Liddy more time to salvage AIG, which needed a U.S. bailout Sept. 16 to escape bankruptcy after three quarterly losses exceeding $18 billion.

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Liddy had vowed to repay the original $85-billion loan by selling units and said some sales might be disclosed in September. The plan stalled as plunging financial markets hampered potential buyers.


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