Citi Group and U.S. Government close to stock deal

February 27, 2009

Citigroup(ChattahBox) — Citigroup Inc and the Obama administration are close or about to annouce an agreement in which the government will substantially raise its investment in the bank, in return for concessions, the Wall Street Journal has reported.

Under a deal expected to be announced today (Friday), the Treasury Department would conditionally agree to convert some of its current holdings of preferred Citigroup shares into common stock, at an unknown price speculated at as much as $5 a share.

The size of the government’s new stake will hinge on the amount of preferred shares that private investors, including sovereign wealth funds, agree to convert into common stock. The Treasury will match the private investors’ conversions dollar-for-dollar up to $25 billion, the Journal said. The Treasury’s stake is expected to rise to 30 percent to 40 percent of Citigroup’s shares, the Journal said.

Although, Chief Executive Vikram Pandit is expected to keep his job, the government is demanding that Citigroup overhaul its board of directors as part of the deal, the Journal said.


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