An investment management firm has arranged for funds and affiliates to buy 80% of American General Finance Inc. from American International Group Inc. (NYSE:AIG).

Fortress Investment Group L.L.C., New York (NYSE:FIG), hopes to close on the deal by March 31, 2011, according to AIG, New York, and Fortress.

AIG says it expects to record a $1.9 billion loss on the deal, eliminate $17 billion in debt from its balance sheet, and emerge with a 20% stake in the finance company.

American General Finance, Evansville, Ind., was founded in 1920. It sells loans, retail financing and other credit-related services in the United States and the United Kingdom.

Fortress, a hedge fund with $42 billion in assets that went public in 2006, believes American General Finance is a good company doing business in an underserved market, according to Fortress Co-Chairman Wesley Edens.

Fitch Ratings, Chicago, says the deal should help AIG reduce its ratio of debt to capital to 50%, from 57%.

-ab