AIG announced today that it will reduce its federal debt by $25 billion through the offering of preferred stakes in two units it plans on spinning off. According to the Houston Chronicle, the insurer will offer these stakes to the government as a means of chipping away at the $40 billion AIG owes the Federal Reserve Bank of New York.
The two units, American Life Insurance (ALICO) and American International Assurance (AIA Group) will be spun off into special purpose vehicles which will eventually undergo initial public offerings.
The New York Fed will get a $16 billion stake in ALICO and a $9 billion stake in AIA Group.
In addition to the $40 billion loan AIG received from the New York Fed, the insurer also took $40 billion in Troubled Asset Relief Program funding, as well as an unrelated $85 billion loan.
AIG has also said it will spin off a third unit, AIU Holdings, in further efforts to reduce its government debt.