The insurer is putting two units into SPVs in order to reduce its Federal debt by $25bn

American International Group (AIG) agreed to give the Federal Reserve Bank of New York stakes in two units in order to cut the debt it owes the bank by $25bn.

AIG will put two of its leading life insurance franchises, American International Assurance Company (AIA), its Asian insurance arm, and American Life Insurance Company Inc. (ALICO), into special purpose vehicles and give the Fed $16bn and $9bn of preferred shares respectively.

The deal is designed to reduce the debt AIG owes the Fed by $25bn.

Debevoise & Plimpton LLP is advising AIG and AIA in relation to the transaction.