The U.S. Treasury will take the cost of a loan to a group of investors who bought shares in a U.K. company to repay $300 million in interest.
The Treasury said Tuesday that it will repay the loan through its own reserves in a bid to avoid a default that would have wiped out a significant portion of the $3 billion loan to the insurer, which is a member of the FCA Group.
The FCA is part of the U.N.-backed European Union’s bailout of the stricken company, which has since been sold.
It was the first time Treasury has agreed to repay a loan through reserve funds, which the government typically does not provide.
The government said it will pay a $1.3 billion interest on the $300 billion loan, which will be repaid with the proceeds from the sale of the remaining shares.
The decision comes as the government struggles to stem the fallout from the financial crisis and is seeking to avoid default.
Treasury Secretary Jacob Lew said the U-K.
deal is an example of the government’s ability to repay loans without resorting to taxpayer funds.
“The F1C has a record of providing timely, cost-effective and timely repayment of large-scale corporate loans and has demonstrated an ability to meet the very specific conditions set out by Treasury,” Lew said in a statement.
“While the Treasury will need to make additional adjustments in the near future, the Government will continue to make all necessary adjustments to the financial statements to ensure that taxpayer funds are fully returned to taxpayers.”
A spokesman for the UBS Group told the Financial Times that the company is “confident that the UB Group will continue its successful recovery.”
The government last month agreed to pay $6 billion to the ULB Group for loans from the Troubled Asset Relief Program.
That deal allowed the government to refinance its loans without borrowing funds.
The United Kingdom government has also said it has agreed with the Treasury to take on additional liabilities related to the bank’s assets, such as those related to a UBS subsidiary that was seized in an investigation into corruption.