AIG will repay part of Fed debt through IPOs

In an effort to repay some of its $173.3 billion debt to the United States government, AIG (AIG) reached an agreement with the Federal Reserve Bank of New York to pay back $25 billion through initial public offerings of two of its international life-insurance units -- American International Assurance and American Life Insurance Co. (ALICO).

AIG said last month it would expedite its efforts to spin off American International Assurance by listing the initial public offering on the Asian Stock Exchange. As part of that deal and the decision to spin off American Life Insurance Co., these entities would be put into "separate special purpose vehicle in exchange for preferred and common interests in the vehicles," The Wall Street Journal reported. "The New York Fed will get $25 billion in preferred interests in the two special purpose vehicles, reducing the debt AIG owes the bank by the same amount."