By Paritosh Bansal
NEW YORK (Reuters) - American International Group Inc
The U.S. government, AIG and credit rating agencies, including Moody's, S&P and A.M. Best, are in discussions, as the troubled insurer prepares to post a roughly $60 billion quarterly loss, the source said. The loss, which equates to about $460,000 per minute, would be the largest in corporate history.
The possibilities of relief for AIG, once the world's largest insurer by market value, include eliminating the London Interbank Offered Rate floor on the interest rate it pays on the government's $60 billion credit line. The company currently pays 3 percentage points above Libor.
Discussions also include the possibility of easing the dividend on the government's preferred investment, although talks appeared to be tending away from eliminating it altogether, the source said.
These are among a wide variety of options are still under discussion, the source said, adding that the situation was still in a flux as negotiators try to meet a Monday deadline for AIG to post its results.
AIG declined to comment.
A key focus of the talks is to avoid a ratings downgrade, which could have serious ramifications on the insurer's liquidity and hurt its businesses. Customers could cancel their insurance policies if a minimum rating is no longer satisfied.
Among the concepts being discussed, AIG may try to securitize some life insurance policies and hand them over to the government as repayment of its debt, the source said.
The thought is that additional availability under the government's lending commitment would give more comfort to the rating agencies, the source said.
AIG was first rescued in September after bad mortgage bets left it on the verge of collapse. The government stepped in with a $85 billion bailout and subsequently offered additional financing, bringing the support up to $123 billion.
Then in November, the government had to revise its bailout package, raising its aid further, to about $150 billion.
AIG's shares closed down 10 cents, or 19.2 percent, at 42 cents on the New York Stock Exchange.
(Reporting by Paritosh Bansal; Editing by Tim Dobbyn)
