NEW YORK (Reuters) - The United States government is looking at buying several billion dollars of preferred shares from American International Group and possibly acquiring billions more of bonds guaranteed by the insurer, a source familiar with the matter said.

The options are being discussed as AIG and the government try to restructure the insurer's emergency loans, which saved AIG from bankruptcy but burdened the struggling insurer with a high interest rate. Talks to restructure the credit facility are expected to lead to improvement in the terms, the source said.

Restructuring AIG's debt will give it more breathing room to sell assets over time to pay back the government.

"Any easing of the terms that were struck in the original deal would be a plus," said Donald Light, an analyst at Celent LLC in San Francisco.

The talks are at a sensitive stage and nothing definitive has been determined, the source cautioned. But an announcement could come as soon as today, when AIG is due to report quarterly results.

The government gave AIG, once the world's largest insurer by market value, $85 billion in bailout financing in September after counterparties and rating downgrades forced it to post large amounts of collateral for credit derivatives positions.

The government later offered additional financing to bring the total support to AIG to $123 billion.

The initial credit line has a two-year term and an onerous interest rate, currently above 10 percent. AIG also granted the government warrants for a nearly 80 percent stake.

AIG and the government are considering options including reducing the interest rate and increasing the term of the existing loan to five years, the source said.

An equity injection through preferred shares may come with a reduction in the size of the $85 billion facility, the source said.

The talks with the government also include the possibility of setting up vehicles to reduce the cash drain on AIG associated with credit default swaps and securities lending, the source said.

One possibility being discussed is a plan to set up a facility where the government would buy some of the bonds that underlie credit default swaps, a type of insurance contract providing the buyer with protection against risk.

Such a facility would be offset by the cash collateral of about $30 billion that AIG has posted to back those CDS and that the government can expect to get back, the source said.

The size of such a facility is under discussion and could change substantially, but in talks earlier this week it was seen to be in the $60 billion to $70 billion range, the source said.

"This is really just the portion of the credit default swap book that has caused like 90 percent of the write-downs," the source said. "They will only take out the bad stuff."