AIG cuts debt to $17 bn by closing NY Fed deals

Troubled insurer American International Group (AIG) has closed two deals with the New York Federal Reserve (FRBNY) in a move to reduce its overall debt by more than half to $17 billion.

AIG, which had taken over $180 billion in government aid last year, said its outstanding principal balance owed to FRBNY has been reduced to $17 billion from about $42 billion.

In a statement AIG said it has closed two previously announced transactions with FRBNY that have reduced AIG's debt obligations to the Federal Reserve by $25 billion in exchange for FRBNY's acquisition of preferred equity interests in the American International Group's subsidiaries.

AIG's debt reduction follows the deal reportedly announced in March last year to give the New York Fed a preferred stake in two of AIG's life insurance companies, American Life Insurance Co (Alico) and American International Assurance (AIA).

"Today's announcement that we have reduced our debt to FRBNY by $25 billion sends a clear message to taxpayers: AIG continues to make good on its commitment to pay the American people back," AIG Chief Executive Officer Bob Benmosche said.