AIG, US in talks to restructure credit facility -source

NEW YORK (Reuters) - American International Group Inc (AIG.N) is in talks with the U.S. government to restructure its credit facility, which could lead to an equity investment in the troubled insurer of several billion dollars, a source familiar with the matter said on Friday.

The terms being discussed also include a reduction in the interest rate and an extension of the term of the existing loan, which could be for as much as five years from current two years, the source said.

An equity injection through preferred shares may also come with a reduction in the size of the $85 billion loan, the source said. The talks also include the possibility of setting up vehicles to reduce cash drain on AIG associated to credit default swaps and securities lending, the source said.

The talks are at a sensitive stage and it is not a done deal, the source said. An announcement could be made as soon as this weekend or on Monday when AIG announces its results.

(Reporting by Paritosh Bansal)

(For more M&A news and our DealZone blog, go to www.reuters.com/deals)