The Federal Reserve Bank of New York is all set to dispose more than $7bn in face value of “toxic” securities related to the government bailout of American International Group (AIG).

The central bank of the US has planned to call for an auction so that it can get the fair price from the sale, which will enable AIG to repay the last loan owed to the New York Fed, according to Financial Times.

Bids will be accepted by the federal bank for securities in collateralized debt obligations, CDOs, held in a vehicle called Maiden Lane III that was set up as part of AIG’s bailout in 2008.

Along with $5bn of equity from AIG, the vehicle used the money to buy the CDO securities from large banks to cancel loss-producing derivatives trades at AIG.

The regulator said that at the end of May this year, the balance on the loan and accrued interest was $3.5bn, but that amount does not include some of the proceeds from the previous Maiden Lane III sales this year.

Major banks are expected to partake in the auctions, with a strategy to resell the debt to investors for profit and is also anticipated that AIG may try to buy back its shares by churning nearly $2bn.