Citi and Feds Reach Deal

The WSJ reports:

Under terms being finalized late Thursday, the Treasury has agreed to convert some of its current holdings of preferred Citigroup shares into common stock, a move that could better protect shareholders against future losses.
As a condition, the government is demanding that the New York company overhaul its board of directors, the people said. Treasury will call for Citigroup’s board to be comprised of a majority of independent directors. Chief Executive Vikram Pandit is expected to keep his job under the agreement.
The government will convert its stake only to the extent that Citigroup can persuade private investors such as sovereign wealth funds do so as well, the people said. The Treasury will match private investors’ conversions dollar-for-dollar up to $25 billion.
The size of the government’s new stake will hinge on how many preferred shares private investors agree to convert into common stock. The Treasury’s stake is expected to rise to up to 40% of Citigroup, the people said.

Posted by on February 27th, 2009 at 12:31 am


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