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Wednesday, February 25, 2009

WSJ: Citi Deal Is Imminent

by Calculated Risk on 2/25/2009 08:49:00 PM

Here is our daily "Citi deal is imminent" story.

From the WSJ: Citi Is Near Deal to Boost U.S.'s Stake by Up to 40%

Citigroup Inc. is closing in on an agreement to boost the federal government's stake in the company to as much as 40%, according to people familiar with the situation. A deal could be announced as soon as Thursday.
This could raise some interesting problems in foreign countries:
For example, a Mexican law bars any institution that is more than 10%-owned by a foreign government from running a bank in that country. As a result, some Citigroup executives are worried that an increased U.S. stake might subject the bank to pressure to relinquish some or all of its ownership of Grupo Financiero Banamex ...
UPDATE: This happened twice today. One government release says one thing, another says something different. I noted that the Treasury White Paper on the Capital Assistance Program said:
These shares can convert at the firm’s discretion (with the approval of their regulator) into common equity if needed to preserve lending in worse-than-expected economic environment at a conversion price set at a 10% discount from the prevailing level of the institution’s stock price as of February 9, 2009.
Nemo notes that the Term Sheet says:
Conversion price is 90% of the average closing price for the common stock for the 20 trading day period ending February 9, 2009, subject to customary anti-dilution adjustments.
One release from the FDIC called the program the "Capital Assessment Program" (and I labeled a couple of charts with that name), but the real name is the "Capital Assistance Program".