The Banking and Strategy Initiative

Chillin' out till it needs to be funded

A chastised Citi with a $58 billion Obama Stake |

Citigroup Inc. finalized an agreement with the federal government that clears the way for its highly diluted stock exchange to take place, boosting common-equity levels and giving the U.S. a one-third stake in the banking giant.

Assuming full conversion rates, Citigroup will swap some $58 billion of preferred-stock and trust-preferred securities into common stock, boosting shares

Citigroup Inc. on Wednesday began a long-delayed $58 billion stock swap that could leave the government with a 34% stake in the nation’s third-largest bank.

Citigroup (C, Fortune 500) plans to swap common stock for as much as $33 billion of preferred shares, and convert as much as $25 billion of preferred shares held by the U.S. Treasury into common stock.

Citigroup said the swap could make it one of the world’s best-capitalized banks, adding up to $61 billion of tangible common equity and $64 billion of Tier-1 common equity. It had planned to begin the swap in April.

The exchange offer could result in the issuance of nearly 18 billion new common shares, diluting the holdings of existing investors by 75%. The public exchange offers expire July 24.

Citigroup shares closed Tuesday at $3.41. The offer price is $3.25 and the offer is closed by June 24

for details Citigroup begins $58 billion stock swap – Jun. 10, 2009


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