IRVINE, Calif. (AP) _ Ailing American Savings & Loan Association plans to sell up to $2.5 billion worth of federally insured certificates of deposit, a spokeswoman said Monday.

The CDs will carry a federal guarantee that the full amount of principal and interest will be paid through their maturity date even if American Savings is put into receivership by the federal government, said Layna Browdy, spokeswoman for Financial Corp. of America, parent of the S&L.

American Savings is the nation's second-largest thrift and is the target of a rescue effort by the Federal Home Loan Bank Board. The board has set an Aug. 1 deadline to negotiate a rescue by the Robert M. Bass Group Inc. of Fort Worth, Texas, that reportedly will involve injection of money by the group and the Federal Savings and Loan Insurance Corp.

The CDs will be sold through a group of Wall Street brokers led by Merrill Lynch & Co., the spokeswoman said. A letter of assurance from the FSLIC states that holders of brokered CDs would be paid on schedule if the government put the thrift into receivership, Ms. Browdy said.

Often, time deposits are paid off all at once when an institution is placed into receivership.

Sale of the CDs could help stem an outflow of deposits at the institution, but isn't a response to American Savings net deposit outflow of $978 million in the second quarter, Ms. Browdy said. FCA officials have been discussing such a sale internally for about a year with the idea of attracting depositors from outside the area covered by American Savings' California branch network, she said.

The CDs will be sold in denominations of $1,000 with terms of three, six, nine and 12 months. The timing and amount of the initial sale hadn't been set, Ms. Browdy said, adding that the total amount sold could total $2.5 billion over a period of time.