AIG to split up into 3 government-controlled units

[Gpond]

Troubled insurer American International Group Inc. (AIG) is in advanced discussions with the US authorities over a restructuring that would split the company into at least three government-controlled divisions, the Financial Times reported on Thursday.

Under the proposed plan, the government would swap its current 80% holding in the insurer for large stakes in three units - AIG's Asian operations, its international life assurance business and the US personal lines business, the FT reported. A fourth unit, comprised of AIG's other businesses and troubled assets, could also be formed.

In return, the authorities would relax the terms, or even cancel a large portion, of a $60 billion five-year loan to AIG and convert $40 billion-worth of preferred stock into shares.

The report stated that the restructuring could provide a template for carving up other troubled financial groups such as Citigroup.

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[cdrwok]

is it a ploy to split AIG, so that they cant claim that they are too big to fail?? Wondering.

[audreyh1]

I think the underlying insurance businesses are sound. It's the parent that did all the shenanigans with the CDSs and thus has been "parasitic" to its held companies.

But that's about all I understand about it.

Audrey

[Ed_The_Gypsy]

Any idea what might happen to the bondholders?