Ratings Agencies Back AIG Bailout Revision- WSJ

AIG was first rescued by the government in September after bad mortgage bets left it on the verge of collapse.

Credit rating agencies Standard & Poor's and Moody's Investors Services have endorsed terms of a deal revising American International Group Inc's bailout, The Wall Street Journal reported on Sunday.

Citing people familiar with the matter, the newspaper said on its website the agreement removed the most immediate threat to implementation of the plan.

A source familiar with the matter told Reuters on Saturday that AIG was close to a deal with the U.S. government that would ease the terms of its bailout, provide a further equity commitment and help it pay down debt.

The board of the troubled insurer is due to meet on Sunday to vote on the deal, which could be announced when AIG reports its quarterly results on Monday, the source said.

The revised bailout would allow the insurer to avoid a credit ratings downgrade that could have had serious ramifications on the insurer's liquidity and hurt its businesses, the source added. Customers could, for instance, cancel their insurance policies.

AIG was first rescued by the government in September after bad mortgage bets left it on the verge of collapse.

The government stepped in at the time with an $85 billion bailout and subsequently offered additional financing, bringing the support up to $123 billion.

In November, the government had to revise its bailout package, raising its aid further, to about $150 billion.

AIG has said it has been losing business and finding it harder to win new clients since its rescue in September.

The revised AIG agreement is expected to include an additional equity commitment of about $30 billion, more lenient terms on an existing preferred investment, and a lower interest rate on a $60 billion government credit line, the source said.

The new equity commitment would give AIG the ability to issue preferred stock to the government at a later date, the source said.

A new deal would come as the insurer prepares to post the largest quarterly loss in corporate history -- a roughly $60 billion fourth-quarter loss, produced in large part by write-downs on certain tax assets and commercial mortgage backed securities, the source told Reuters.

The loss -- which works out to about $460,000 per minute -- is mostly noncash, the source said.