From the New York Times article we find that the U.S. government now is the largest shareholder of Citigroup!!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After two multibillion-dollar lifelines failed to shore up Citigroup, the government will increase its stake in the company to 36 percent from 8 percent.

How?  Well, I am glad that you asked! 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Under the deal, Citibank said that it would offer to exchange common stock for up to $27.5 billion of its existing preferred securities and trust preferred securities at a conversion price of $3.25 a share, a 32 percent premium over Thursday’s closing price.

This will strengthen the Citibank capital base (stock) and also lower costs.  Preferred stock carries a required dividend payment, whereas common stock is not required, saving the company a huge payout regularly.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The government of Singapore Investment Corporation, Saudi Prince Walid bin Talal, Capital Research Global Investors and Capital World Investors have already agreed to participate in the exchange, Citibank said in a statement. Existing shareholders will own about 26 percent of the outstanding shares.

Did you catch that one?  Existing shareholders now are only holding 26% of the outstanding shares!

Now to the Chief Executive Officer (CEO)'s statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

“This securities exchange has one goal — to increase our tangible common equity,” Citi’s chief executive, Vikram Pandit, said. “This transaction — which requires no additional investment from U.S. taxpayers — does not change Citi’s strategy, operations or governance. Our clients and partners will not be affected and will continue to receive the high level of service they expect from Citi around the world.”

The Obama administration deliberately stopped short of securing a majority or controlling interest in Citigroup, but will probably come under intense pressure to take a much larger role in shaping the bank’s direction. Taxpayers, after pumping more than $45 billion into the bank, will now become Citigroup’s single largest shareholder.