February 27, 2009
The US government, throwing yet another lifeline to Citigroup, will boost its stake in the banking giant to as much as 36%, encourage private investors to help shore up the bank’s capital and radically reshape the board.
The Treasury agreed to convert up to $25 billion in government-held preferred shares to common equity—provided private investors contribute an identical sum—in the third major aid package for Citigroup since mid-October. The move won’t involve any new government money for now, however.
The Treasury, which has provided a total of $45 billion to Citigroup, left the door open for the bank to seek additional government funding or for the conversion to common shares of the remaining $20 billion in federal bailout money it received late last year. The government currently holds about an 8 percent stake in Citi.
While the package does not immediately inject more money into Citigroup, it gives Chief Executive Vikram Pandit more time to shrink the third-largest US bank, sell unwanted assets and restore investor confidence.
It also give the government far greater influence on Citigroup’s operations, short of an outright nationalization.
The Emergency Election Sale is now live! Get 30% to 60% off our most popular products today!