Take Date Article Headlines 24/11/2008 6:29:16 PM CITIGROUP INC SAYS GOVERNMENT ENTITIES WILL ASSUME 90% OF ANY LOSSES ABOVE THAT LEVEL AND CITI WILL ASSUME THE BALANCE
Take Date Article Headlines 24/11/2008 6:27:34 PM CITIGROUP INC SAYS GETS $40 BLN CAPITAL BENEFIT THROUGH AGREEMENT WITH FED, FDIC, TREASURY
Take Date Article Headlines 24/11/2008 6:27:01 PM CITI ADDS $40 BILLION OF CAPITAL BENEFIT THROUGH AGREEMENT WITH U.S. TREASURY, FEDERAL RESERVE, AND FDIC
Citi to issue preferred stock and warrants to U.S. Treasury and FDIC
Strike price on warrants set at $10.61
Citi to receive capital benefits from government guarantee on $306 billion of
assets
Citi secures access to multiple additional liquidity facilities
NEW YORK--(Business Wire)--
Citi (NYSE: C) today announced that it has reached an agreement with the U.S.
Treasury, the Federal Reserve Board, and the Federal Deposit Insurance Corp.
(FDIC) on a series of steps to strengthen Citi?s capital ratios, reduce risk,
and increase liquidity, as described below:
CAPITAL
* The U.S. Treasury will invest $20 billion in Citi preferred stock under the
Troubled Asset Relief Program (TARP).
* Citi will issue an incremental $7 billion in preferred stock to the U.S.
Treasury and the FDIC as payment for a government guarantee on $306 billion of
securities, loans, and commitments backed by residential and commercial real
estate and other assets.
* As a result of the asset guarantee, the $306 billion portfolio will have a new
risk weighting of 20%, thus freeing up an additional $16 billion of capital to
the company.
* Citi will issue warrants to the U.S. Treasury and the FDIC for approximately
254 million shares of the company?s common stock at a strike price of $10.61.
* Citi also has agreed not to pay a quarterly common stock dividend exceeding
$0.01 (one cent) per share for three years effective on the next quarterly
common stock dividend payment.
The program significantly strengthens Citi?s key capital ratios by generating
approximately $40 billion of capital benefits as follows:
* $20 billion from the TARP investment.
* $3.5 billion, the portion of the $7 billion of preferred stock fee recognized
for capital purposes.
* $16 billion of capital benefits resulting from the asset guarantee.
Citi?s Tier 1 capital ratio for the third quarter ended September 30, 2008, on a
pro forma basis, for the October TARP capital injection and the new capital
generated by today?s announcement, subject to Federal Reserve Board approval, is
expected to be approximately 14.8% and its TCE/RWMA ratio would be approximately
9.3%.
RISK REDUCTION
Under the guarantee, Citi will assume any losses on the portfolio up to $29
billion on a pre-tax basis, in addition to Citi?s existing reserves; the
government entities will assume 90% of any losses above that level and Citi will
assume the balance. Citi will retain these assets on its balance sheet and
realize the associated cash flow.
LIQUIDITY
In addition to its extensive access to existing liquidity sources, Citi has been
provided expanded access to both the Federal Reserve?s Primary Dealer Credit
Facility and the discount window, resulting in strong additional liquidity
resources should they be needed. Citi also has access to the yet-unused Federal
Reserve?s Commercial Paper Funding Facility and intends to issue debt under the
FDIC?s Temporary Liquidity Guarantee Program.
The agreement also provides that an executive compensation plan, including
bonuses, that rewards long-term performance and profitability, with appropriate
limitations, must be submitted to, and approved by, the U.S. government.
?This weekend, the U.S. government and Citi worked together in an unprecedented
way to address market confidence and the recent decline in Citi?s stock price,?
said Vikram S. Pandit, Chief Executive Officer. ?We reached an agreement based
on an innovative market solution to further strengthen our capital ratios,
reduce risk, and increase liquidity. We appreciate the tremendous effort by the
government to assure market stability.
?We are committed to streamlining our business and providing outstanding banking
services to our clients around the world. We will continue to focus on
opportunities and alternatives to further enhance the company?s overall position
and value,? Mr. Pandit concluded.
The transaction has been unanimously approved by the Citi Board of Directors.
For more details, please see the term sheet for the transaction at
www.citigroup.com/citi/fin/index.htm
Citi
Citi, the leading global financial services company, has some 200 million
customer accounts and does business in more than 100 countries, providing
consumers, corporations, governments and institutions with a broad range of
financial products and services, including consumer banking and credit,
corporate and investment banking, securities brokerage, and wealth management.
Citi's major brand names include Citibank, CitiiFinancial, Primerica, Smith
Barney, Banamex, and Nikko. Additional information may be found at
www.citigroup.com or www.citi.com.
Forward-Looking Statements
Certain statements in this document are ?forward-looking statements? within the
meaning of the Private Securities Litigation Reform Act. These statements are
based on management's current expectations and are subject to uncertainty and
changes in circumstances. Actual results may differ materially from those
included in these statements due to a variety of factors. More information about
these factors is contained in Citi's filings with the Securities and Exchange
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