Citigroup in talks to raise funds to repay bailout
11 Dec 2009
Citigroup, the banking and financial services giant that is now one-third owned by the US government, has been sounding out shareholders and regulators about a $15-billion fundraising plan that could help it pay back some of the bail-out money it received from taxpayers last year, according to various media reports.
Citi is also planning to raise around $2 billion of mandatory convertible securities. These are a new form of security which converts into equity when a bank's capital ratio falls below a pre-determined level.
Vikram Pandit, the group's chief executive officer, began talks with the government after rival Bank of America last week said it was reimbursing the US Treasury and exiting the bail-out scheme. That would leave Citigroup in the somewhat uncomfortable position of being one of only two of the original bail-out recipients still in debt to the government.
However, the talks are at a delicate stage and could collapse without a deal, as some among Citi's regulators were concerned that the bank might not be strong enough to repay the funds from the troubled asset relief programme (TARP), according to a Fianancial Times report.
Moreover, the government is also likely to announce its intention to sell its 34-per cent stake in Citigroup over a period of a year or so.
Regulators at the Federal Deposit Insurance Corporation, which guarantees some $21 billion of Citigroup's debt and virtually all of its $900 billion of customer deposits, have cautioned against allowing the bank to exit the bail-out scheme early without being sure it has more than enough capital to withstand the recession. The US Treasury, though, is believed to be keener on allowing Citigroup to make the repayments.
