American International Group Inc. agreed to sell a majority stake in its consumer lender to Fortress Investment Group LLC, getting rid of a unit that has reported about $1.7 billion in operating losses since 2008 and accumulated more than $17 billion in debt.
Fortress' funds and affiliates will take an 80% stake in American General Finance Inc., and AIG will retain the rest, according to a press release Wednesday that did not disclose terms. The deal is expected to close by March 31.
AIG Chief Executive Officer Robert Benmosche is divesting some of the insurer's assets to help repay its $182.3 billion government bailout. The insurer said in August it was exploring "strategic alternatives" for American General, including a sale of its $2.4 billion investment in the subsidiary.
The lending unit lost access to financing sources including commercial paper and unsecured debt after AIG was downgraded amid losses that led to the 2008 rescue. AIG said this February that it intended to support the subsidiary through Feb. 28, 2011.
American General writes mortgages, personal loans, home equity lines and financing for retailers' clients; it has more than 1 million customers.
The business was founded in Evansville, Ind., in 1920 and bought by AIG in 2001.
The lender cut 1,400 jobs and closed 196 branch offices last year, it said in a March filing. It posted operating losses of $723 million in 2008, $868 million in 2009 and $143 million in the first six months this year.
The unit, with $17.3 billion in debt at June 30, could have been put through bankruptcy, the Congressional Oversight Panel said in a June report. This approach would "avoid indirectly subsidizing money-losing subsidiaries and their creditors," according to the report.
American General was downgraded to junk in December by Moody's Investors Service on the possibility that AIG might end its support.