Citi to raise $20 bn to pay back US government

Citigroup intends to raise $20.5 billion in the stock market as part of its plan to repay bailout money and free itself from government restrictions.

Updated: Dec 17, 2009, 19:06 PM IST

New York: Citigroup, led by Indian American chief executive Vikram Pandit, intends to raise $20.5 billion in the stock market as part of its plan to repay bailout money and free itself from government restrictions.

The New York-based banking giant said on Wednesday that it would offer 5.4 billion shares of common stock priced at $3.15 per share, 10 cents below what the Treasury paid for each of its 7.7 billion shares. It will also offer 35 million "tangible equity units," which are comprised of a prepaid stock purchase contract and a note, for $100 each.

The stock offering is expected to raise $17 billion, while the tangible equity units could bring in another $3.5 billion. Citi said the combined offering is the largest public equity offering in US history.

Citi also confirmed reports that the Treasury, which holds a 34 percent stake in the bank, had decided not to sell any of its shares in connection with the offering, but did not say why. The Treasury also extended the "lock-up period" on the sale of its 7.7 billion shares to 90 days from 45 days, Citi said.

But the Wall Street said the US government abruptly shelved plans to sell as much as $5 billion of stock in Citigroup Inc as part of the payback plan after investors demanded a price so low that the Treasury Department would have lost money on the deal.
The huge offering encountered a lukewarm reception on Wall Street, where investors were sceptical of the company`s earnings prospects and had already spent heavily on shares of rival banks this week, it said.

Citigroup said it would no longer be considered a recipient of "exceptional financial assistance" under the Treasury Department`s Troubled Asset Relief Programme once the offering is complete and the loss-sharing agreement it has with the government is terminated.

That would free Citi from government imposed restraints on, among other things, executive compensation.
Citigroup became one of the biggest recipients of bailout money last year after the government injected $45 billion into the company to help stabilize the embattled lender.

Concerned about the company`s underlying health and ability to endure future loan losses, the government converted $25 billion of its preferred-stock stake in the company into common stock over the summer.

Citi to suspend foreclosures for 30 days

Citigroup Inc. will suspend foreclosures and evictions for 30 days in a temporary break for about 4,000 borrowers during the holiday season.

The New York-based bank said Thursday the suspension will run from Friday through Jan. 17. It applies only to borrowers whose loans are owned by Citi. Borrowers who make payments to Citi but whose loans are owned by other investors are out of luck.

"We want our borrowers to have a much less stressful time, to spend their time with their families during the holidays as opposed to worrying about their homes," Sanjiv Das, head of the company`s mortgage division, said in an interview.

The suspension means Citi will halt foreclosure sales and stop evicting homeowners from properties it has already seized. The company projects it will help 2,000 homeowners with scheduled foreclosure sales and another 2,000 that were due to receive foreclosure notices.