The insurance giant American International Group said on Tuesday that it had closed two debt-for-equity transactions that reduce its debt with the Federal Reserve Bank of New York by $25 billion.

A.I.G. said that under the agreement the New York Fed would receive preferred shares with a liquidation preference worth $16 billion in American Life Insurance Company and $9 billion in American International Assurance Company Ltd., which would be placed in special purpose vehicles .

The insurer said that the special purpose vehicles would prepare the two subsidiaries for initial public offerings or third-party sales, and in a separate statement said it was moving forward with the separation of American Life Insurance.

The liquidation preference is an undisclosed percentage of the estimated fair market value of the two A.I.G. units. A.I.G. retains the common interests in American Life and American International Assurance, and thus would benefit should the market valuation of the two units be in excess of $25 billion low fee payday loans.

A.I.G. said that as of Tuesday, its outstanding principal balance under the New York Fed credit facility was about $17 billion and the total amount available under the facility had been reduced to $35 billion from $60 billion.

&S220;We continue to focus on stabilizing and strengthening our businesses, but expect continued volatility in reported results in the coming quarters, due in part to charges related to ongoing restructuring activities,&S221; the A.I.G. chief executive, Bob Benmosche, said in a statement.

A.I.G. in Debt-for-Equity Swap With New York Fed

WASHINGTON (MarketWatch) -- Senators return to Washington on Monday and resume debate on a health-care overhaul, with Democrats aiming to pass a bill by Christmas but facing tough fights on issues ranging from abortion to the strength of a government-run health plan.

Senate Majority Leader Harry Reid needs 60 votes to pass his bill, which seeks to extend insurance coverage to 94% of Americans and set up a public health insurance option. But Republicans and Democrats alike are expected to offer a slew of amendments on the 10-year bill, slowing its passage through the chamber.

The Senate reconvenes at 2 p.m. Eastern.

Iran plans to create 10 more uranium facilities and health-care debate moves to the Senate floor, but President Barack Obama's biggest challenge this week will be delivering his Afghanistan strategy speech Tuesday.

Sen. Bernard Sanders, a Vermont independent who votes with the Democrats, said Sunday he's got about 10 amendments and that he wants a strong "public option" in the bill. As currently written, the bill would allow states to opt out of the government-run health plan. Sen. John Rockefeller, D-W.Va., also says he will probably offer an amendment strengthening the plan.

Abortion is another issue that could hold the bill's passage up. Sen. Orrin Hatch, R-Utah, is expected to offer an amendment that would put tough restrictions on abortion in the bill. The House's health-care overhaul bill passed on Nov auto loans. 7 only after anti-abortion lawmakers won passage of an amendment that would bar abortion coverage in the public plan. Read more MarketWatch health-care reform coverage.

Reid must also assuage concerns about the bill's cost. On Sunday, Sen. Evan Bayh, D-Ind., said he'd like to see an enforcement mechanism included in the bill to make sure it won't increase the federal deficit. The Congressional Budget Office says that the $848 billion bill will cut the deficit by $130 billion over 10 years.

"I think we need to have an enforcement mechanism in there, as best we can, to ensure that future Congresses will have the backbone to put some of these efficiencies into place," Bayh said on "Fox News Sunday." See earlier story about health-care.

Senators voted 60-39 on Nov. 21 to allow debate on the bill, a close vote that underscored Democrats' need for as much support as possible. To pass the bill, Reid will need the support of all the Senate's 58 Democrats and its two independents. Congressional Republicans have been nearly unanimous in opposition to the bill, saying it amounts to a government take-over of health care.

"There's no way to fix this bill," said Sen. Jon Kyl, R-Ariz., on Sunday. He said Republicans would like to "start over" on the measure.

Senators return to debate health-care overhaul