WSJ Reports Of Citigroup/Government Agreement On Preferred Share Conversion Into Common Stock

The WSJ is reporting that Citigroup (C) and the government have reached an agreement whereby the governement will increase its stake in the bank in return for a boardroom shakeup.  The government is demanding the new board be comprised of a majority of “independent directors”.  Vikram Pandit, the Chief Executive, is expected to keep his job.

The government has agreed to convert some of its current preferred Citigroup shares into common stock.  The conversion is contingent on Citigroup’s ability to persuade private investors, including sovereign wealth funds, to do the same dollar for dollar up to 25 billion.   It is reported that the governments state in Citigroup’s could rise to as high as 40%.

The agreement as reported does not stipulate a price for the conversion of the preferred.  Reports have indicated that Citigroup sources are requesting a conversion price of as much at $5.00 per share.  This is double the closing price today.  The common stock would not pay dividends.

A deal of like this would likely give the stock market a boost.

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