The last of the major Wall Street banks to not have repaid its US bailout funds — though certainly not the last organization to hold onto parts of the $245 billion of total bailout money – announced a plan yesterday to return its share. Citigroup has not yet repaid $20 billion of the money it received. It plans to begin doing so this week by selling around $17 billion in common stock and $3.5 billion in tangible equity units. Pending regulators’ permission, it will also facilate the sale of $25 billion that the government holds in bank stock by directly replaying $20 billion of TARP trust preferred secrities and helping the US Treasury in its sale of up o $5 billion of its common shares concurrent with its own stck offering. Finally, Citigroup will end a loss-sharing agreement regarding approximately $250 billion of problematic credit card and real estate assets.
Paying back.
The plan would provide Citigroup with one of the largest capital cushions of any of the major banks. This is necessary in order for the bank to avoid the need for government assistance in the future. Repaying the bailout money also frees Citigroup from many of the restrictions, especially restrictions on executive pay, that came with the acceptance of the funds. Though the move is hoped to aid the economy, create new business, regain the trust of stockholders, and ingratiate the bank to legislators, it comes with its own costs. The return will cause a $10.1 billion loss to Citigroup in the fourth quarter and the new stock offering will dilute the value of shares currently held by stockholders.
Tamar.
The CEO Game.
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