Citigroup has announced that it will issue common stock in exchange for preferred securities, which will substantially increase its tangible common equity without any additional US government investment.
The transaction is intended to build Citi’s tangible common equity to a level that removes uncertainty and restores investor confidence in the company, said Citi.
Citi will 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. The US government will match this exchange up to a maximum of $25 billion face value of its preferred stock at the same conversion price.
Vikram Pandit, CEO of Citi, said: This securities exchange has one goal – to increase our tangible common equity. While we believe tier one capital remains the most important measure of the financial strength of banks, we recognize that the markets also view tangible common equity as an important measure.
This transaction — which requires no additional investment from US taxpayers – does not change Citi’s strategy, operations or governance. Our clients and partners will not be affected and will continue to receive the high level of service they expect from Citi around the world.
