After scrambling for days to reach a deal with U.S. regulators, banking giant Citigroup – one of the most troubled icons of the financial crisis – announced today it has reached an agreement to repay $20 billion in bailout funds and “terminate the loss-sharing agreement” with the government.
Citi Chief Executive Officer Vikram Pandit was expected to wrap up a deal this week, after about two weeks of negotiating. The chief motivation came after Bank of America announced late last month that it was repaying its $45 billion in bailout assistance, under the Troubled Asset Relief Program, or TARP.
“The TARP program was designed to provide assistance until banks were in a position to repay it prudently,” Pandit said in a statement today. “We owe the American taxpayers a debt of gratitude and recognize our obligation to support the economic recovery through lending and assistance to homeowners and other borrowers in need.”
Under its agreement with the U.S. Treasury, Citi will issue $20.5 billion of capital and debt – $17 billion of common stock and $3.5 billion of tangible equity units.
U.S. Treasury will sell up to $5 billion of the common stock it holds in Citigroup in a concurrent secondary offering.
“The Treasury has also announced that it plans to sell the remainder of its shares in an orderly fashion over the next 6-12 months,” Citigroup said.
Citi received $45 billion last year under TARP. This year, the government agreed to convert $25 billion of those funds into Citigroup common stock, leaving the United States with about a 34 percent stake in the bank.
Citi emphasized more than once in its statement that it will no longer be connected to government aid, or “exceptional financial assistance,” under TARP beginning in 2010.
“As I have stated many times over the past year, we planned to exit TARP only when we were convinced that it was prudent to do so,” Pandit said. “By any measure of financial strength, Citi is among the strongest banks in the industry, and we are in a position to support the economic recovery.”
Citigroup has posted this PDF with details of its repayment agreement.
