Treasury Announcement on Citi

February 27th, 2009 8:11 am | by John Jansen |

 

Treasury announces participation in Citigroup’s exchange offering

 

Citigroup is planning to strengthen its capital structure through conversion of a significant portion of its preferred securities to common equity in a series of exchange offers. Citigroup requested that the Treasury participate in this exchange offer by converting a portion of its preferred security to common equity alongside the other preferred holders.

 

Treasury is willing to participate in this arrangement to the extent Citigroup is able to reach agreement with its other preferred holders, under the following conditions:

·         Treasury would convert its security to match dollar for dollar the private preferred exchanges.

·         Treasury would convert up to the $25 billion of preferred stock issued under the Capital Purchase Program. Remaining Treasury and FDIC preferred issued under the Targeted Investment Program and Asset Guarantee Program would be converted into a trust preferred security of greater structural seniority that would carry the same 8% cash dividend rate as the existing issue.

·         Treasury will receive the most favorable terms and price offered to any other preferred holder through this exchange.

This transaction does not increase the amount of Treasury’s investment in Citigroup.

 

Separately, the Chairman of the Board of Citigroup has informed us that the Company will be altering the Board of Directors so that a majority of the Board will be comprised of new independent directors as soon as feasible.

 

Citigroup will be taking part, alongside other banks with over $100 billion in assets, in the forward-looking supervisory assessment process announced on February 25, 2009 as part of the Treasury Capital Assistance Program.  In connection with this program, Citigroup will be allowed to apply for additional Mandatory Convertible Preferred securities or request conversion of the remaining preferred held by Treasury into these securities, consistent with the terms of the program.

 

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  1. 9 Responses to “Treasury Announcement on Citi”

  2. By Roman on Feb 27, 2009 | Reply

    This is horrible. We are Japan. Except Japan at least continued to provide stimulus after stimulus to keep the economy alive until an export boom took over as the engine of growth.

    Obama probably won’t be bold enough to ask for another stimulus package and even worse there is no viable engine of growth out there that I can see. Welcome to the Second Great Depression!

  3. By BL on Feb 27, 2009 | Reply

    A suitably large energy independence project equal in size to WWII would do, and set the basis for future prosperity. Some people say limiting CO2 will cripple the ecomony. I think it would stimulate new businesses. The CO2-generating industries are where the excess capacity is now anyway.

    BL

  4. By Jenn on Feb 27, 2009 | Reply

    OK, so the blog has a story about the US Treasury and Citi — those are called “subjects”. Somewhat related topics might include banking or nationalization, possibly drawing inferences from Japan and other countries who have already tried it.

    “BL” wrote about energy investments and CO2 generating industries… proving that reading comprehension is not one of America’s strengths (a problem the SAT / Princeton Review has mentioned often)

    It don’t matter that we aint good at readin’, cause weeze gonna do science stuff and make lotsa energy!

    Obama mentioned during his campaign that math and science are also no longer American strengths. Anyone who has visited a US university in the last decade couldn’t possibly miss that the science and math departments are overwhelmingly dominated by foreign students — with only an occasional American as the exception that proves the rule.

    No matter. America is a country whose former VP (and inventor of the internet) won a Nobel Prize for claiming that there is universal agreement among scientists that CO2 causes global warming — while several hundred scientists signed a petition saying the exact opposite. Some people would say this proves Al Gore is as bad at science as he is at politics — but it all depends on what your definition of “universal” is… wait, that depends on what your definition of “is” is

    America is a nation of people who cannot understand their native tongue, cannot do math or science, and continuously tries to implement socialism while telling the rest of the world how capitalism is superior

    We can’t even balance our national checkbook — so how can anyone expect us to model climate change?

    America cannot solve the energy problem — we simply do not have the math or science skills to have a chance.

    Osama Bin Laden will not destroy the United States — our own stupidity will get us first…

  5. By Rajesh on Feb 27, 2009 | Reply

    This is a transaction to provide incentives to sovereign wealth funds to convert their preferred stock into common stock. The goal is to increase the ratio of assets to tangible common equity. However, the transaction does not bring any new equity to CitiGroup, it does reduce the cost of the equity, since the preferred dividend will be reduced.

  6. By Roman on Feb 27, 2009 | Reply

    The only good thing that came out this morning was that Citi finally was cutting its dividend to 0. Something it should have done a long, long time ago.

    But that’s overshadowed by what I now see as the approach of the government in dealing with the financial institutions. Continue to prop them up and hope things turn around sometime. Again, I say..WELCOME TO JAPAN!

    And if I have to hear Obama or Geithner say how we can’t afford to “underestimate the problem…do too little, too late…and not move aggressively enough” while they underestimate the problem, do too little, too late and are not moving aggressively enough, I will seriously lose it.

    I voted for the guy and I like his approach to health care, the environment, foreign policy, etc, but on the most important issue of our time, the economy, he is striking out just as bad as Bush.

  7. By Bman on Feb 27, 2009 | Reply

    You guys are killing me with this “welcome to Japan” stuff. We are not like Japan – they are a developed nation.

  8. By BL on Feb 27, 2009 | Reply

    Well Jenn, Roman opined that nothing would get us out of Great Depression Two. I believe there is a reasonable way out.

    BL

  9. By Aman on Feb 27, 2009 | Reply

    Jenn,
    If you go back and read as much history of the world, former civilizations, empires, nations, as is available, you can always find the same criticisms. So, perhaps the problem is a Human problem, not an American one.
    But, wait you haven’t really taken the time to study much history either, have you? Just another American with a open ended 4 paragraph opinion, eh?

    -A

  10. By Al on Feb 27, 2009 | Reply

    “…our own stupidity will get us first…”

    isn’t it already? )))

    ~ “The difference between stupidity and genius is that genius has its limits.” AE

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