The Federal Reserve Board and the U.S. Treasury have restructured the government's financial support to the American International Group (AIG) in order to keep the company strong and facilitate its ability to complete its restructuring process successfully.
According to the Fed, these new measures establish a more durable capital structure, resolve liquidity issues, facilitate AIG's execution of its plan to sell certain parts of its businesses in an orderly manner, promote market stability and protect the interests of the U.S. government and taxpayers.
The Treasury plans to purchase $40 billion of newly issued AIG preferred shares under the Troubled Asset Relief Program. This purchase will allow the Federal Reserve to reduce from $85 billion to $60 billion the total amount available under the credit facility established by the Federal Reserve Bank of New York in September.
Certain other terms of the existing New York Fed credit facility – such as the interest rate – will be modified. In addition, the Fed has authorized the New York Fed to establish two new lending facilities – a residential mortgage-backed securities facility and a collateralized debt obligation facility.
Source: Federal Reserve