U.S. Govt. to buy 80% of AIG with $85 billion loan


From CNBC.com
Tuesday, September 16, 2008


American International Group will get an $85 billion loan from the federal government in exchange for an 80 percent stake in itself, sources have told CNBC.

Sources said the loan, which will allow AIG to avoid bankruptcy, will be secured and include incentives for quick asset-sales by AIG.

The deal severely dilutes existing shares of the company.

Management at the firm will be fired as part of the deal.

AIG has been racing the clock to avoid a bankruptcy filing on Wednesday, making efforts to work out a deal with the Federal Reserve to shore up its finances.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke met with Senate and House leadership Tuesday night to discuss how to assist AIG, sources said.

The Fed's financial aid for the troubled insurer marks a reversal of its decision on Monday to refuse a bridge loan to AIG.

The Fed met with the company's advisers throughout Tuesday and came to a better understanding of what is needed to help the company through its current crisis, people familiar with the negotiations told CNBC.

Reports Tuesday said the Fed was considering a conservatorship for AIG—which would mean bringing in an outsider to run the company. But sources told CNBC that no legal authority exists for such an arrangement.

AIG shares swung wildly all day Tuesday in heavy volume. ...

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