Citigroup holders tender $20.3 billion of preferreds, trust preferreds in public exchange offers

By Angela McDaniels

Tacoma, Wash., July 27 - Citigroup Inc. said preliminary results show that it received tenders for approximately $20.3 billion liquidation value of publicly held convertible and non-convertible preferred and trust preferred securities in exchange offers that expired at 5 p.m. ET on July 24.

The company offered shares of common stock in exchange for up to $20.5 billion of the securities. It expects to issue 5,833,324,374 shares in the offer.

The offers began on June 10.

According to a company news release, holders tendered:

• $1,968,415,775 liquidation preference, or 96.49%, of Citigroup's 8.5% non-cumulative preferred stock, series F;

• $5,875,723,871 liquidation preference, or 97.93%, of Citigroup's 8.4% fixed-rate/floating-rate non-cumulative preferred stock, series E;

• $3,618,241,750 liquidation preference, or 97.70%, of Citigroup's 8.125% non-cumulative preferred stock, series AA;

• $3,145,930,950 liquidation preference, or 99.28%, of Citigroup's 6.5% non-cumulative convertible preferred stock, series T;

• $1,154,199,000 liquidation preference, or 32.98%, of Citigroup Capital XXI's 8.3% enhanced trust preferreds (E-Trups);

• $344,754,650 liquidation preference, or 43.78%, of Citigroup Capital XX's 7.875% E-Trups;

• $655,700,800 liquidation preference, or 53.53%, of Citigroup Capital XIX's 7.25% E-Trups;

• $259,317,975 liquidation preference, or 45.90%, of Citigroup Capital XIV's 6.875% E-Trups;

• $554,731,675 liquidation preference, or 46.81%, of Citigroup Capital XV's 6.5% E-Trups;

• $645,276,325 liquidation preference, or 40.39%, of Citigroup Capital XVI's 6.45% E-Trups;

• $398,801,825 liquidation preference, or 36.25%, of Citigroup Capital XVII's 6.35% E-Trups;

• £400,099,000 liquidation preference, or 80.02%, of Citigroup Capital XVIII's 6.829% E-Trups;

• $5,947,000 liquidation preference, or 2.97%, of Citigroup Capital III's 7.625% trust preferreds (Trups);

• $253,131,150 liquidation preference, or 22.01%, of Citigroup Capital VII's 7.125% Trups;

• $308,710,075 liquidation preference, or 22.05%, of Citigroup Capital VIII's 6.95% Trups;

• $131,054,425 liquidation preference, or 26.21%, of Citigroup Capital X's 6.1% Trups;

• $253,129,675 liquidation preference, or 23.01%, of Citigroup Capital IX's 6% Trups; and

• $140,321,800 liquidation preference, or 23.39%, of Citigroup Capital XI's 6% Trups.

There was a cap on the amount of trust preferreds Citigroup could accept. The company said it would accept trust preferreds with a total liquidation amount equal to $5.6 billion plus whatever remained of a $20.5 billion cap after the regular preferreds were accepted.

Proxy statements

Citigroup was also soliciting proxies to increase the number of authorized common stock, to effect a reverse stock split and to amend its charter and some certificates of designation to modify the rights of the preferred and trust preferred holders.

The proposed changes, as outlined in the preliminary proxy statements, include:

• Eliminating the requirement that full dividends on all outstanding public preferreds must have been declared and paid, or declared and set aside, before Citigroup can pay any dividend on or redeem common stock or any other securities junior to the public preferreds;

• Eliminating the requirement that if full dividends are not declared and paid in full on any series of public preferreds, dividends on all series of stock ranking equally with that series of public preferreds be declared on a proportional basis;

• Eliminating the requirement that dividends on outstanding preferreds be paid, or declared and set apart for payment, before any dividends can be paid on any outstanding shares of common stock;

• Eliminating, upon the delisting of depositary shares representing a series of public preferreds, the right of holders of public preferreds to elect two directors if dividends have not been paid for six quarterly dividend periods;

• Clarifying that any public preferreds acquired by the company may not be reissued by Citigroup as part of that series and will instead be restored to the status of authorized but unissued shares of preferred stock without designation as to the series;

and

• Increasing the number of authorized shares of preferred stock.

Holders who wished to exchange had to vote in favor of the changes to their rights, according to the preliminary proxy statement.

Private offer

The company also held an exchange offer for its convertible preferred securities held by private holders, who tendered $12.5 billion liquidation value of securities in exchange for interim securities and warrants.

Citigroup offered to exchange up to $12.5 billion of the convertible preferreds held by investors other than U.S. government agencies in the offer, and the U.S. government matched the exchange with $12.5 billion of its non-convertible preferreds.

The interim securities will convert to common stock, subject to shareholder authorization of the increase in Citigroup's authorized common stock. The interim securities will pay a 9% dividend if this shareholder authorization is not received, and the dividend will increase quarterly up to a cap of 19%.

The warrants only become exercisable if the shareholder authorization is not obtained and will entitle the holders to purchase a total of 790 million shares of Citigroup common stock at $0.01 per share.

The closing of the exchange by the U.S. government and the private exchange offer was a condition to the exchange offers for the publicly held preferreds and trust preferreds.

The U.S. government agreed to match the liquidation value of the securities exchanged in the public offers, up to $12.5 billion, by exchanging additional preferreds for more interim securities. It will then exchange its remaining preferreds for new trust preferreds bearing an annual coupon of 8%.

The company said that in all, the offers will result in approximately $58 billion liquidation value of preferred and trust preferred securities being exchanged for common stock and an increase in Citigroup's tier 1 common equity to about $64 billion.

Citigroup is a financial services company based in New York.

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