The United States now has a 40 percent stake in Citigroup:
In its most daring bid yet to stabilize Citigroup, one of the nation’s largest and most troubled financial institutions, the Treasury Department announced on Friday that it would vastly increase its ownership of the struggling company.
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.
As part of the deal, Citi will shake up its board so that it has a majority of independent directors, Richard Parsons, the bank’s chairman, said in a statement. The change had been something federal regulators had already been pursuing, according to people close to the deal.
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.
The government will match this exchange up to a maximum of $25 billion of its preferred stock at the same price. In its statement, the Treasury Department said the dollar-for-dollar match was intended to strengthen Citigroup’s capital base.
And so it begins.
