* Ruentex preparing final share purchase agreement-sources
* Ruentex plans statement Friday-source
* Picking Ruentex means tough fight with regulators-sources
* Ruentex plans stock and bond issues, gets loans-sources
* Regulator clarifies criteria for potential buyers (Adds statement plans in second paragraph)
By Faith Hung
TAIPEI, Dec 23 (Reuters) - Taiwan conglomerate Ruentex Group has emerged as the front runner to buy AIG's Taiwan unit, three sources with direct knowledge of the situation said on Thursday, as the bailed out U.S. insurer moves closer to wrapping up its second attempt to sell the asset.
Ruentex is planning a statement concerning AIG to the Taiwan Stock Exchange on Friday afternoon in Taipei, another source familiar with the situation said. No further details or separate confirmation was immediately available.
Ruentex, a major player in the hypermarket business in China and Taiwan, is the only one of the four bidders drafting a final share purchase agreement with AIG, a sign that both parties are close to a deal, said the sources, who declined to be identified due to the sensitivity of the situation.
As in any auction, the winning bidder could change at the last minute, or the sale could fall apart, as happened to American International Group's first attempt to sell the Nan Shan unit in a $2.15 billion deal blocked by regulators in August.
That winning bid was not the highest. This time media reports have put Ruentex's offer at as much as $3 billion, with other offers put at from as low as $1.5 billion.
Ruentex said on Thursday that it was still waiting to hear from AIG.
The other bidders are Taiwan banks Cathay Financial Holding, Fubon Financial and Chinatrust Financial.
If AIG does pick Ruentex, it could set itself up for a tough fight with a regulator acutely sensitive to the fate of Nan Shan, which insures almost one-sixth of Taiwan's population.
The Financial Supervisory Commission does not think Ruentex meets all the five criteria it has laid down for a Nan Shan buyer, said two of the three sources.
Those criteria are that any buyer needs to show fund-raising ability for future operations, a long-term commitment to run Nan Shan and experience in running an insurance business, and must promise to take care of employees and policy holders and must have funding sources that meet Taiwan regulations.
Late on Thursday it clarified the first of those, saying that any buyer of over 50 percent in an insurer must be able to show it can fund the business for 10 years.
Ruentex Chairman Samuel Yin has experience running insurance and asset management businesses, but sold them for a profit after a few years, behaviour the regulator is not keen on.
The regulator's official view is that it does not either favour, or object to, any bidder.
AIG Chief Executive Bob Benmosche met regulators last week, expressing hopes the sale could be approved soon, according to a separate source close to the regulatory process.
Benmosche also talked to each bidder about a share purchase agreement, said one of the three sources.
"Ruentex is preparing a final SPA, on which AIG can make a decision," said that source.
Directors of the U.S. insurer are expected to confer on Thursday to try to agree on a preferred bidder for Nan Shan, the Wall Street Journal reported.
Proceeds from the sale will be used to pay back some of AIG's bailout by the U.S. government.
Two Ruentex units, Ruentex Development and Ruentex, have teamed up with Pou Chen, a maker of Nike shoes, to create a joint venture for the bid.
They announced earlier this week they would raise the venture's capital to T$2.5 billion. Ruentex also has permission from Taiwan banks for loans in total of T$40 billion, said one of the three sources, and is planning to issue convertible bonds.
Nan Shan is Taiwan's No.3 insurer by market share after the insurance arms of Cathay Financial and Fubon, and has assets of T$1.7 trillion ($56.5 billion). It lost T$12.7 billion in the second quarter or this year and T$12.5 billion in the third. ($1=T$29.9)