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Citigroup Reaches Aid Deal With Government

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The Associated Press

Published: February 27, 2009

NEW YORK - Citigroup Inc. said Friday it reached a deal that will give the government an increased stake in the struggling bank.

The company also said it recorded a goodwill impairment charge of about $9.6 billion due to deterioration in the financial markets.

The government, along with other private investors, will convert some of their preferred stock in Citi to common shares. The Government off Singapore Investment Corp., Saudi Arabian Prince Alwaleed Bin Talal, Capital Research Global Investors, Capital World Investors are among the private investors that said they would participate in the exchange.

The increase in government ownership will not require additional taxpayer money. The government currently holds about an 8 percent stake in Citi.

As part of the agreement, Citi will suspend dividends on both its common stock and preferred shares.

Citi will also reshape its board of directors, Richard Parsons, the bank's chairman, said in a statement. The board will have a majority of new independent directors as soon as possible, Parsons added.

One of the hardest hit banks by the ongoing credit crisis, Citi has already received $45 billion in cash from the government and guarantees protecting it from the bulk of losses on $300 billion of risky investments.

The goodwill charge was added to Citi's 2008 results along with a $374 million impairment charge tied to its Nikko Asset Management unit. The charges resulted in Citi revising its 2008 loss to $27.7 billion, or $5.59 per share.

Shares of Citi rose 3 cents to $2.49 in premarket trading.

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