Treasury to unload more Citi shares

$2.2 billion in trust-preferred securities will be sold.

By TheStreet Staff Sep 29, 2010 1:13PM

By Lauren Tara LaCapra, TheStreet


The U.S. government is further exiting its Citigroup (C) position, with the U.S. Treasury Department today announcing the sale of $2.2 billion worth of trust-preferred securities (TruPS).


In a statement, Citigroup said it will remarket all of the Treasury's TruPS, at the Treasury's request. "We are very appreciative of the support provided by the UST during the financial crisis," Citi added.


Citi issued the hybrid instruments in exchange for the Treasury's agreement to share losses on a $301 billion pool of toxic assets. The insurance was to last five to 10 years and initially came with $4 billion in of TruPS.


At the time the arrangement was crafted, in January 2009, Citigroup was in a precarious financial state. But by the end of last year, things had improved dramatically, and the giant New York-based bank asked Treasury to terminate its guarantee. The government agreed, while retaining the $2.2 billion in TruPS.

All proceeds from the sale will be a net profit to taxpayers, because the Treasury didn't end up taking any losses.


The Federal Deposit Insurance Corp. also took part in the initial deal, via its Temporary Liquidity Guarantee Program. The FDIC still holds $800 million worth of additional TruPS that aren't included in the $2.2 billion sale. The FDIC must turn over proceeds to the Treasury Department, minus any losses it incurs from guaranteeing Citi's assets.


The Treasury's TruPS announcement is separate from its sales of Citi common stock that are still ongoing.


In recent trading, Citi was up 2.4% at $3.97.


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