AIG in talks with Fed over new bailout package: Report

LONDON: AIG is believed to have sought a new bailout package from the US government in less than two months after the insurance giant received a loan of $85 billion from the Federal Reserve, says a media report.

"AIG is asking the US government for a new bailout less than two months after the Federal Reserve came to the rescue of the stricken insurer with an $85 billion loan," the Financial Times said quoting people close to the situation.

Earlier in September, fearing worldwide impact of collapse of AIG, the United States government had agreed to a $85 billion bailout that gave it control of the troubled insurance giant operating in 130 countries.

The Financial Times said "AIG's executives were in negotiations with the authorities over a plan that could involve a debt-for-equity swap and the government's purchase of troubled mortgage-backed securities from the insurer".

"One of AIG's proposals to the Fed is to swap the loan, which gave the authorities an 80 per cent stake in the company, for preferred shares or a mixture of debt and equity," FT said.

Such a structure would reduce the interest rate to be paid by AIG and possibly the overall amount it has to repay, it said.

Earlier, AIG executives had complained to government officials that the interest rate on the initial loan -- 8.5 per cent over the London Interbank Borrowing Rate -- is crippling the company.

Quoting people close to the development, the daily said "an extension in the term of the loan from the current two years to five years is also possible".