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Jun 25, 2009, 20:32 GMT

AIG to repay 25 billion dollars in debt

Washington - Ailing insurance giant American International Group Inc (AIG) on Thursday said it would reduce its debt by 25 billion dollars by offering the federal government preferred stock in two of its businesses. The troubled global insurance company helped send the financial industry into a tailspin last September after posting hundreds of billions of dollars in losses due to its exposure to the US mortgage market. The company insured mortgage-backed securities held by US and global banks, which plummeted in value as a US housing boom turned to bust in 2007. The US government will get stakes in two AIG businesses - American International Assurance Co Ltd and American Life Insurance Co - with the eventual aim of selling the shares to the public. The move 'represents a major step toward repaying taxpayers,' CEO Edward Liddy said. AIG was brought to the brink of collapse last September and has since received bailouts totalling more than 180 billion dollars. The bail-outs have become a major headache for President Barack Obama, after it emerged in March that the company paid out about 165 million dollars in bonuses to its executives after receiving government funds.

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