AIG, Prudential in talks to restructure Asian deal: Report

LONDON: American International Group Inc and Britain's Prudential Plc are in advanced talks to restructure the USD 35.5 billion sale of the US group's Asian unit in a move that would cut the cash consideration by about USD 2 billion, says a media report.

The deal could answer UK regulators' last-minute objections to the deal.

The Financial Times reported that Prudential had approached AIG in recent days to press for a change in the terms of the deal, which was agreed in March, in an effort to allay the concerns of the Financial Services Authority (FSA) over its capital position.

However, AIG's board has not yet made a final decision on the American International Assurance (AIA) deal and could take a view in the next few days, the report noted.

Under the new terms being discussed, the US government, which owns 80 per cent of AIG, would receive some USD 2 billion less in cash, taking some new junior loan or hybrid securities issued by Prudential instead.

Hybrid security is a financial instrument that combines both debt and equity characteristics.

Earlier in March, Prudential agreed to pay AIG USD 25 billion cash, USD 2 billion in preferred stocks and USD 8.5 billion-worth of equity and equity-linked securities for buying its Asian unit.

However, the UK regulator delayed the launch of a USD 20 billion rights offering to pay for the AIA deal, citing concerns about Prudential's capital position.

According to the publication, Prudential now plans to raise additional capital by issuing hybrid securities that would be treated as equity for capital purposes.

The company had considered the sale of USD 5 billion in bonds to help finance the cash portion of the AIA deal, but will now issue part of the funds in the form of hybrids instead.