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Feds to exchange bailout money for stake in Citigroup

2009-03-01 04:58:59 (GMT) (Caymanmama.com - Banks & Banking Top Stories News)

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Citigroup Center, Chicago

The government will trade nearly $25 billion in bailout funds it provided to struggling bank Citigroup Inc. for some 36 percent stake in the company

Charlotte, North Carolina (CaymanMama.com) –  The government will trade nearly $25 billion in bailout funds it provided to struggling bank Citigroup Inc. for some 36 percent stake in the company.

The arrangement announced Friday is the third attempt at a bailout plan for Citigroup in the past five months, and is contingent on private investors also agreeing to the deal.

According to the Associated Press, “The aim is to keep the New York bank holding company alive and bolster its capital as it faces growing losses amid the intensifying global recession. Existing shareholders would see their ownership stake shrink to as little as 26 percent and the bank said it is eliminating all dividends on common shares.”

Investors were disillusioned at the prospect of the deal, anticipating dilution of their stake, and sent shares tumbling 94 cents, or 32.8 percent, to $1.56 in pre-market trading. The announcement also pulled stock futures even further down ahead of Friday’s market opening.

Citigroup also announced that it recorded a goodwill impairment charge of approximately $9.6 billion due to a weakening in the financial markets.



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