Breaking news people! The WSJ reports that Citigroup and the U.S. have reached an agreement in which the government will substantially increase its stake in the bank in return for a boardroom shakeup:
Under a deal expected to be announced early Friday morning, the Treasury Department has agreed to convert some of its current holdings of preferred Citigroup shares into common stock. The government will convert its stake only to the extent that Citigroup can persuade private investors to do so alongside the government, the people said. The Treasury will match the private investors’ conversions dollar-for-dollar up to $25 billion.
The size of the government’s new stake will hinge on the amount of preferred shares that private investors, including sovereign wealth funds, agree to convert into common stock. The Treasury’s stake is expected to rise to 30% to 40% of Citigroup’s shares, the people said.
As a condition to the agreement, which is designed to ease investor jitters about the adequacy of Citigroup’s capital base, the government is demanding that the New York company overhaul its board of directors, the people said. Treasury will call for Citigroup’s board to be comprised of a majority of independent directors.
I wonder how the market will respond tomorrow morning?
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