The troubled insurance giant AIG is in sensitive talks with the federal government to restructure parts of its bailout loan, Reuters reported.

A source close to the situation told Reuters that the negotiations could lead to the U.S. government purchasing preferred shares of American International Group Inc. worth several billion dollars.

The talks haven't yet yielded a finalized deal and terms are still being hashed out, but an announcement could come as early as Sunday afternoon or Monday, the source told Reuters.

The federal government provided the beleaguered AIG with $85 billion in bailout loans in September; the funds were later increased to $123 billion.

The financing came with a high interest rate for AIG, which was asked to grant warrants to feds for a roughly 80 percent stake in the firm.

The insurance company owed $81.2 billion as of Nov. 5, according to Reuters.

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