AIG Seeks to Ease Its Bailout Terms

American International Group Inc. is seeking an overhaul of its $150 billion government bailout package that would substantially reduce the insurer's financial burden, while further exposing U.S. taxpayers to its fortunes, people familiar with the matter say.

Under the plan, the government loan of up to $60 billion at the heart of the bailout would be repaid with a combination of debt, equity, cash and operating businesses, such as stakes in AIG's lucrative Asian life-insurance arms. AIG and the government have been discussing the changes since December and plan to announce them by Monday when the insurer is expected to report fourth-quarter results, the people said.

The earnings report is expected to underscore AIG's worsening condition with its total loss for the quarter likely to top $60 billion, these people said.

One of the restructuring plan's central goals is to safeguard AIG's credit ratings, which, if cut, would force it to make billions of dollars in payments to its trading partners, further weakening its already precarious financial position. The new plan is being structured in close consultation with major credit-rating agencies.

AIG's talks with the government are ongoing and while they are at an advanced stage the deal may still fall apart or change significantly.

Government approval would signal a complete turnabout in its approach to the insurer since it first intervened to rescue it: from that of a creditor to one of a potential owner.

At the time of the original bailout in September, the government imposed what many considered onerous interest rates and deadlines for AIG to repay its loans by selling off assets. It quickly became clear, however, that the erosion of the value of AIG's assets and worsening financial crisis would make it difficult to meet the goals without jettisoning assets at fire-sale prices.

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