Citigroup Inc. (NYSE: C)
November 24, 2008
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 – 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%.