NEW YORK (Bloomberg) — American International Group Inc., the insurer with a $122.8 billion credit line from the U.S., got another $20.9 billion under the Federal Reserve's commercial paper programme designed to unlock short-term debt markets.

Four affiliates of the New York-based insurer participated in the programme, which swaps commercial paper for cash, AIG spokesman Nicholas Ashooh said yesterday in an interview. The proceeds will help refinance AIG's outstanding commercial paper and pay down AIG's original $85 billion loan from the Fed, the firm said in a regulatory filing. "They're paying off a Fed loan with another kind of government subsidy — it's like using one credit card to pay off another credit card," said Robert Haines, an analyst at CreditSights Inc. "If they make progress paying off debts over time, I don't think it'll be viewed as necessarily a bad thing."

Chief executive officer Edward Liddy said last week that the insurer may need more than the $122.8 billion that was available to it. AIG, which agreed on September 16 to turn over majority control to the US in exchange for an $85 billion loan, got access to an additional $37.8 billion this month. The company had drawn $90.3 billion in federal money as of last week. AIG has said it believes its Bermuda unit, which employs around 200 people, will be little affected by the company's situation.

"The expectation is, it will allow us to pay down the $85 billion credit facility," Ashooh said. "It's about liquidity, the ability to get access to cash to satisfy our obligations." The terms of the commercial paper funding are better than that of the original loan, he said.

AIG joined a growing list of borrowers that have sold tens of billions of dollars of the short-term debt to the central bank as credit became more difficult to obtain. Companies use commercial paper to finance daily expenses such as payroll and rent. The commercial paper market seized up when Lehman Brothers Holdings Inc. filed for bankruptcy in September.