The US will cut the original $85 billion loan that saved the New York-based insurer in September to $60 billion, then buy $40 billion of preferred shares, and purchase $52.5 billion of mortgage securities owned or backed by AIG, according to a person familiar with the matter, according to Bloomberg. The funds will help AIG retire part of its credit-default swap portfolio and bolster its securities lending operations, said the person, who declined to be identified because the plan hasn't been officially announced.

The changes may give chief executive officer Edward Liddy more time to salvage AIG, which needed US help to escape bankruptcy after three quarterly losses exceeding $18 billion. Mr Liddy's plan to repay the original loan by selling units stalled as plunging financial markets cut into their value and forced potential buyers to shore up their own balance sheets.

The Federal Reserve and AIG declined to comment. AIG is scheduled to publish third-quarter results today.

Recently, private banks, whose clients may have lost out from UK-based AIG fund investments, have urged concerned investors to talk to them first as a group of investors gear up to launch a class action suit to press for action to recover money. 

High net worth individuals have invested $8.8 billion in AIG’s Enhanced fund, the majority of which was put into corporate bonds that have now plummeted in value as a result of the credit crunch. Insurance giant AIG suspended withdrawals from its Enhanced fund in September, just prior to its nationalisation by the US government. Days later, it announced that the fund would close to new business in December.