Author Topic: Citigroup  (Read 822 times)

Offline junjun40

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Citigroup
« on: September 25, 2009, 03:56:50 AM »
From my Inbox. Hope this article is not dead-on-arrival.

Those who miss out Citigroup, this is the chance...


Subject: Fw: (BN) U.S. Said to Explore Selling Citigroup Stake After Shares
Gain



By Robert Schmidt and Bradley Keoun
    Sept. 15 (Bloomberg) -- The U.S. Treasury Department and
Citigroup Inc. have begun discussing how to sell the 34 percent
stake that the government acquired in the rescue of the bank,
people familiar with the matter said.
    The Treasury, which owns 7.69 billion common shares after a
recent preferred-stock conversion designed to shore up the
bank's capital, may start unloading the stake as soon as
October, one of the people said. It aims to sell the holdings
over the next six to eight months, the person said.
    A sale may bring Citigroup Chief Executive Officer Vikram
Pandit closer to an exit from the bailout program while allowing
the government to claim a profit. Because the New York-based
bank's stock price has gained since $25 billion of bailout funds
were exchanged for common shares, the Treasury is sitting on a
paper profit of $9.77 billion.
    "Given the conversion and what's happened to the stock
price, it is likely that the government would make money on
it," said Moshe Orenbuch, an analyst at Credit Suisse Group who
rates the shares "neutral."
    The planning is in the early stages, and some transactions
may need regulatory approvals, the people familiar with the
matter said.
    Under one scenario, the shares would be sold to public
investors in blocks over six to eight months. In another, the
government may sell a small amount of stock daily or weekly,
said the people, who declined to be identified because the talks
are private. Under a third option, the shares would be sold at
once in a managed offering.
    Treasury spokesman Andrew Williams and Molly Meiners, a
spokeswoman for Citigroup, declined to comment.

                       $52 Billion Rescue

    Citigroup, the third-biggest U.S. bank, received $52
billion in bailout aid, and a sale of the common stock would
leave the Treasury with a $27 billion investment. That stake is
in trust-preferred shares -- a class of securities that ranks
senior to common stock and junior to most debt.
    If the Treasury sells its shares through a managed
offering, the bank may piggyback on the effort by simultaneously
issuing new shares to help pay off the remaining bailout funds,
one person familiar with the matter said.
    The Obama administration has begun efforts to wind down the
government's $700 billion financial rescue program, while
pledging to manage the withdrawal carefully. In a report
yesterday, the Treasury said it was "committed to ensuring the
stability of financial markets" and that "the process of exit
will be prudent, not hasty."

                       'Prominent Role'

    "While this demonstrates the federal government's intent
to wind down investments in specific companies, its prominent
role in the financial-services industry will remain for the
foreseeable future," said Stephen Myrow, managing director of
ACG Analytics LLC, a Washington-based independent investment
research firm.
    Other bailed-out banks, including Bank of America Corp.,
based in Charlotte, North Carolina, and San Francisco-based
Wells Fargo & Co., have pledged to repay TARP money.
    JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan
Stanley, all based in New York, repaid TARP funds in June. In a
speech yesterday, President Barack Obama said taxpayers have
earned a 17 percent return so far on stakes repaid by banks.
    Citigroup's stock closed at $4.52 a share yesterday, a 39
percent premium over the Treasury's conversion price of $3.25.
    Richard Parsons, chairman of Citigroup's board, said in an
interview yesterday in New York with Bloomberg Television that
he had "every confidence that Citi will be able to exit the
TARP program, and actually be able to give the American taxpayer
a decent return." He declined to provide a time frame.

                       Citigroup Shares

    One question that probably must be answered before a sale
goes forward is whether the market for Citigroup shares is deep
enough to allow the Treasury to liquidate the stake without
driving down the stock price, Credit Suisse's Orenbuch said.
    There are about 23 billion Citigroup shares outstanding,
and about 15 billion of those are already in public hands,
according to Bloomberg data. About 914 million shares changed
hands each day on average during the past four weeks.
    The market is "certainly deep enough to take a couple of
billion shares, some multiple of a day's volume," Orenbuch said
yesterday in an interview.

For Related News and Information:
Most-read stories on the U.S. Treasury: TNI MOSTREAD TRE <GO>
Winners, Losers in TARP: BTCPP <Index> MRR4 <GO>
Citigroup holders: C US <Equity> PHDC1 <GO>
On the credit crisis: NI CRUNCH BN <GO>
Government relief programs: GGRP <GO>
Mortgage payment calculator: MP <GO>
Credit crunch page: WWCC <GO>
On finance: NI FIN <GO>

--Editors: Dan Reichl, Stephen West.

To contact the reporters on this story:
Robert Schmidt in Washington at +1-202-624-1853 or
rschmidt5@bloomberg.net;
Bradley Keoun in New York at +1-212-617-2310 or
bkeoun@bloomberg.net.

To contact the editors responsible for this story:
Chris Anstey at +1-202-624-1972 or canstey@bloomberg.net;
Alec McCabe at +1-212-617-4175 or amccabe@bloomberg.net