American International Group Inc. is  seeking a new bailout from the U.S. government. The fresh request is the second in less than two months after the Federal Reserve rescued insurance giant with an $85 billion loan.

According to a report in The Financial Times on its Web site, AIG executives were in negotiations on Friday night with authorities over evolving a plan that could involve a debt-for-equity swap and purchase of  mortgage-backed securities by the government from AIG.

AIG’S board meeting is convened for Sunday to approve the results and discuss further course of action for negotiations with the Government.

There are apprehensions that AIG might soon use up the $85bn cash rescue it received from the Fed in September, as well as an additional $37.5bn loan targeted recovering a cash drain from the insurer's securities lending unit.

AIG has drawn down more than $81bn of the combined $122.5bn facility. The company is facing a difficulty in repaying it before the 2010 deadline as there is difficulty in selling assets due to the global financial turmoil.

AIG executives have conveyed to government officials that the interest rate on the initial loan - 8.5 per cent over the London Interbank Borrowing Rate - is ruining the company.