Citigroup reaches aid deal with US government
According to the Citigroup Inc., the U.S. government will exchange up to USD 25 billion in emergency bailout money which would give it as much as a 36 percent stake in the struggling bank.
This deal announcement was made on Friday and is being touted as the third rescue plan for Citigroup in less than half a year. The US government combined with some other private investors is set to convert some of their chosen stock in Citi to common shares.
Citi offers to exchange up to USD 27.5 billion of its existing preferred stock at a conversion price of USD 3.25 per share, a 32 percent premium over the closing price of Thursday.
This conversion will provide Citi the mix of capital to withstand further weakening in the economy. The Government of Singapore Investment Corp., Saudi Arabian Prince Alwaleed Bin Talal, Capital Research Global Investors, and Capital World Investors are among the private investors that have agreed to participate in the exchange.
According to bank’s chairman, Richard Parsons, Citi is also expected to restructure its board of directors.
