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Friday, February 27, 2009

Citi Deal Details

by Calculated Risk on 2/27/2009 09:13:00 AM

From the NY Times: U.S. Agrees to Raise Its Stake in Citigroup

[T]he government will increase its stake in the company to 36 percent from 8 percent.
Under the deal, Citibank said that it would offer to exchange common stock for up to $27.5 billion of its existing preferred securities and trust preferred securities at a conversion price of $3.25 a share, a 32 percent premium over Thursday’s closing price.

The government will match this exchange up to a maximum of $25 billion of its preferred stock at the same price. In its statement, the Treasury Department said the dollar-for-dollar match was intended to strengthen Citigroup’s capital base.

The government of Singapore Investment Corporation, Saudi Prince Walid bin Talal, Capital Research Global Investors and Capital World Investors have already agreed to participate in the exchange, Citibank said in a statement. Existing shareholders will own about 26 percent of the outstanding shares.
The bank will also suspend dividends on its preferred shares and its common stock.
From MarketWatch: Citi CEO says latest deal should end nationalization fear
"[F]or those people who have a concern about nationalization, this announcement should put those concerns to rest," Pandit said.
Here is the Treasury statement: Treasury Announces Participation in Citigroup's Exchange Offering