NEW YORK (Reuters) - A fund established by the Federal Reserve Bank of New York and insurer American International Group acquired an additional $16 billion of bonds guaranteed by the troubled company, AIG said on Wednesday.
The company, bailed out by the U.S. government in September, said it has torn up its guarantee of the bonds.
The fund, Maiden Lane III, was created to buy collateralized debt obligations that AIG has guaranteed. To date, it has purchased $62.1 billion of those assets from banks and other parties.
The deal is part of a plan to clear AIG, once the world's largest insurer, of its credit derivative obligations. Those credit derivatives forced the insurer to post increasing amounts of collateral to counterparties earlier this year, pushing AIG to the brink of bankruptcy.
The U.S. government bailed out AIG with a rescue plan that has ballooned to more than $150 billion. The plan was revised last month to give the insurer more time to sell off assets to repay the government.
As part of the new plan, AIG contributed $5 billion and the New York Fed agreed to provide up to $30 billion of senior funding to Maiden Lane III. AIG is still looking at how to eliminate its exposure to about $12 billion of credit default swaps.
(Reporting by Juan Lagorio; editing by John Wallace)
