US Fed-Res-Bank lends $85 billion to ailing AIG

US Fed-Res-Bank lends $85 billion to ailing AIG

The US Federal Reserve Bank (FRB) of New York will lend $85 billion to the American International Group(AIG) in a plan aimed at saving the insurer from a disorderly failure that could wreak economic havoc.

Under the two-year facility the US government will receive a 79.9 per cent equity interest in AIG and has the right to veto payment of dividends to common preferred shareholders in the deal.

The loan, secured by all assets of AIG and its primary non-regulated subsidiaries, was designed to assist the insurance MNC in meeting its obligations. The loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the economy. The loan is expected to be repaid from proceeds of the sale of the firm’s assets.