Dec 16, 2017

U.S. government agrees to rescue Citigroup Inc.

Published Nov 24, 2008, 12:15am

News brought to you by:
InfoKwik Web Design, Marketing & Hosting Kansas City

U.S. government agrees to rescue Citigroup Inc.


The U.S. government agreed Sunday night to rescue Citigroup Inc. with a plan that includes a $20 billion capital infusion and guarantees for up to $300 billion of Citi's troubled assets, according to media reports.

Treasury Department statement...

November 23, 2008


Summary of Terms


Eligible Asset Guarantee


Eligible Assets: Asset pool consisting of loans and securities backed by residential real

estate and commercial real estate, and their associated hedges, as agreed,

and other such assets as the U.S. Government (USG) has agreed to

guarantee. Each specific asset must be identified on signing of guarantee

agreement. Assets will remain on the books of institution but will be

appropriately “ring-fenced.”


Size: Up to $306 bn in assets to be guaranteed (based on valuation agreed upon

between institution and USG).


Term of Guarantee: FDIC standard loss-sharing protocol: Guarantee is in place for 10 years

for residential assets, 5 years for non-residential assets.


Deductible: Institution absorbs all losses in portfolio up to $29 bn (in addition to

existing reserves)

Any losses in portfolio in excess of that amount are shared USG (90%)

and institution (10%).

USG share will be allocated as follows:

UST (via TARP) second loss up to $5 bn;

FDIC takes the third loss up to $10 bn;


Financing: Federal Reserve funds remaining pool of assets with a non-recourse loan,

subject to the institution’s 10% loss sharing, at a floating rate of OIS plus

300bp. Interest payments are with recourse to the institution.


Fee for Guarantee -


Preferred Stock: Institution will issue $7 bn of preferred stock with an 8% dividend rate

(under terms described below). $4 bn of preferred will be issued to UST.

$3 bn will be issued to the FDIC.


Management of

Assets: USG will provide institution with a template to manage guaranteed assets

This template will include the use of mortgage modification procedures

adopted by the FDIC, unless otherwise agreed.


Risk Weighting: Institution will retain the income stream from the guaranteed assets. Risk

weighting for assets will be 20%.

November 23, 2008


Dividends: Institution is prohibited from paying common stock dividends, in excess

of $.01 per share per quarter, for 3 years without UST/FDIC/FRB consent.

A factor taken into account for consideration of the USG’s consent is the

ability to complete a common stock offering of appropriate size.


Executive


Compensation: An executive compensation plan, including bonuses, that rewards longterm

performance and profitability, with appropriate limitations, must be

submitted to, and approved by, the USG


Corporate

Governance: Other matters as specified

November 23, 2008


Preferred Securities


Issuer: Citigroup (“Citi”)


Initial Holder: United States Department of the Treasury (“UST”).


Size: $20 billion


Security: Preferred, liquidation preference $1,000 per share. (Depending upon the

available authorized preferred shares, the UST may agree to purchase

preferred with a higher liquidation preference per share, in which case the

UST may require Citi to appoint a depositary to hold the Preferred and

issue depositary receipts.)


Ranking: Same terms as preferred issued in CPP.


Term: Perpetual life.


Dividend: The Preferred will pay cumulative dividends at a rate of 8% per annum.

Dividends will be payable quarterly in arrears on February 15, May 15,

August 15 and November 15 of each year.


Redemption: In stock or cash, as mutually agreed between UST and Citi. Otherwise,

redemption terms of CPP preferred terms apply.


Restrictions

on Dividends: Institution is prohibited from paying common stock dividends, in excess

of $.01 per share per quarter, for 3 years without UST consent. A factor

taken into account for consideration of the UST’s consent is the ability to

complete a common stock offering of appropriate size.


Repurchases: Same terms as preferred issued in CPP.


Voting rights: The Preferred shall be non-voting, other than class voting rights on (i) any

authorization or issuance of shares ranking senior to the Preferred, (ii) any

amendment to the rights of Preferred, or (iii) any merger, exchange or

similar transaction which would adversely affect the rights of the

Preferred.


If dividends on the Preferred are not paid in full for six dividend periods,

whether or not consecutive, the Preferred will have the right to elect 2

directors. The right to elect directors will end when full dividends have

been paid for (i) all prior dividend periods in the case of cumulative

Preferred or (ii) four consecutive dividend periods in the case of noncumulative

Preferred.


Transferability: The Preferred will not be subject to any contractual restrictions on

transfer.


Executive


Compensation: An executive compensation plan, including bonuses, that rewards longterm

performance and profitability, with appropriate limitations, must be

submitted to, and approved by, the USG.


Summary of Warrant Terms


Warrant: Institution will issue a warrant to UST for an aggregate exercise value of

10% of the total preferred issued to USG (in both transactions) ($2.7 bn).


Exercise Price: The strike price will be equal to $10.61 per share (the 20 day trailing

average ending on November 21, 2008). The warrants issued to UST are

not subject to reduction based on additional offerings.


Term: Ten years, immediately exercisable, in whole or in part.

Custom KC News Search




Advertise on this site



AddThis Feed Button

Email:

To instant news updates in your email.

Never miss a story!

Tags: , , , U.S. government

Add a Comment

Please be civil.

(Use Markdown for formatting.)

This question helps prevent spam:

Browse more...

Business

Announcement

Find a Job
Keywords:
Location:
Job category:

Search This Site
Search this site or any KC Web Guide

Got Feedback?
Send a letter to the editor.

Subscribe
Sign up for the Free E-Newsletter.
Also receive updates automatically in your email.

Advertise
Promote your brand at KCWebGuides.com.

Religion...

True religion is the life we lead, not the creed we profess.

-- Louis Nizer (1902-1994) American Lawyer

More Quotes

Subscribe