CITIGROUP INC (Form Type: 8-K, Filing Date: 02/27/2009)

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) February 27, 2009

Citigroup Inc.

(Exact name of Registrant as specified in its charter)


Delaware	1-9924	52-1568099
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)


399 Park Avenue, New York,
New York
(Address of principal executive		10043
offices)		(Zip Code)

(212) 559-1000

(Registrant’s telephone number,

including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

x		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

CITIGROUP INC.

Current Report on Form 8-K

Item 8.01 Other Events.

On February 27, 2009, Citigroup Inc. announced that it will issue common stock for up to $27.5 billion of its existing preferred securities and trust preferred securities at a conversion price of $3.25 a share. The U.S. government will match this exchange up to a maximum of $25 billion face value of its preferred stock at the same conversion price. These transactions are intended to increase Citigroup’s tangible common equity (TCE).

A copy of the press release is being filed as Exhibit 99.1 and an outline of the material terms of the transactions is being filed as Exhibit 99.2 to this Current Report on Form 8-K and are incorporated herein by reference in their entirety.

In connection with the proposed exchange offer, Citigroup will file with the Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 and a tender offer statement on Schedule TO that will contain a prospectus and related exchange offer materials. Citigroup will mail the prospectus to the holders of its series of convertible and non-convertible public preferred stock and TruPs and ETruPs that may be eligible to participate in the exchange offer. Holders of these series of preferred stock, TruPs and ETruPs are urged to read the prospectus and related exchange offer materials when they become available because they will contain important information. You may obtain a free copy of the prospectus and related exchange offer materials (when available) that Citigroup will file with the SEC at the SEC’s website at www.sec.gov. The prospectus and related exchange offer materials (when they become available) may also be obtained for free by accessing Citigroup’s website at www.citigroup.com and clicking on the link for “Investors” and then clicking on the link for “All SEC Filings” or by contacting Citigroup at the following address or telephone number: Citigroup Document Services, 540 Crosspoint Parkway, Getzville, NY 14068, or within the United States, at +1-877-936-2737 or outside the United States, at +1-716-730-8055, or by e-mailing a request to docserve@citigroup.com.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number		Description

99.1		Press release, dated February 27, 2009, issued by Citigroup Inc.
99.2		Transaction Outline

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		CITIGROUP INC.


Dated: February 27, 2009	By:	/s/ Michael S. Helfer
		Name:	Michael S. Helfer
		Title:	General Counsel and Corporate Secretary

EXHIBIT INDEX

Exhibit Number		Description

99.1		Press release, dated February 27, 2009, issued by Citigroup Inc.
99.2		Transaction Outline

For Immediate Release

Citigroup Inc. (NYSE: C)

February 27, 2009

Citi to Exchange Preferred Securities for Common,

Increasing Tangible Common Equity to as Much as $81 Billion

Transaction Does Not Involve Additional U.S. Government Investment

New York - Citi today announced it will issue common stock in exchange for preferred securities, which will substantially increase its tangible common equity (TCE) without any additional U.S. government investment. The transaction is intended to build Citi’s TCE to a level that removes uncertainty and restores investor confidence in the company.

Citi will offer to exchange common stock for up to $27.5 billion of its existing preferred securities and trust preferred securities at a conversion price of $3.25 a share. The U.S. government will match this exchange up to a maximum of $25 billion face value of its preferred stock at the same conversion price. (See attached transaction summary).

Citi Chief Executive Officer Vikram Pandit said, “This securities exchange has one goal – to increase our tangible common equity. While we believe Tier 1 capital remains the most important measure of the financial strength of banks, we recognize that the markets also view Tangible Common Equity as an important measure. This transaction – which requires no additional investment from U.S. taxpayers – does not change Citi’s strategy, operations or governance. Our clients and partners will not be affected and will continue to receive the high level of service they expect from Citi around the world.”

This transaction could increase the TCE of the company from the fourth quarter level of $29.7 billion to as much as $81 billion, which assumes the exchange of $27.5 billion of preferred securities, the maximum eligible under this transaction. Citi’s Tier 1 capital ratio is 11.9 percent as of December 31, 2008, and is among the highest of major banks. This ratio is not impacted by this transaction.

Based on the maximum eligible conversion, the U.S. government would own approximately 36 percent of Citi’s outstanding common stock and existing shareholders would own approximately 26 percent of the outstanding shares. All investors’ new stakes will be determined following the exchange.

Citi will offer to exchange:

·	Interim securities and warrants for privately held convertible preferred securities;

·	Interim securities and warrants for U.S. government-held preferred securities; and

·	Common stock for publicly held convertible and non-convertible preferred securities.

The interim securities will convert to common stock, subject to shareholder authorization of the additional common stock needed for the transaction. The interim securities are common stock equivalent. The warrants entitle the holders to purchase shares of Citi common stock at $0.01 a share if such shareholder authorization is not obtained. If shareholder authorization is not received, the interim securities will pay a 9 percent dividend that will increase quarterly.

The non-U.S. government exchange will accommodate all preferred stock holders other than trust preferred holders. The Government of Singapore Investment Corporation Pte Ltd., HRH Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud, Capital Research Global Investors, Capital World Investors and other investors have said they will participate in the exchange. Depending upon the participation rate in the exchange, holders of Trust Preferred Securities (TruPs) and Enhanced Trust Preferred Securities (ETruPs) may also be eligible to participate.

The U.S. government will exchange the portion of its existing preferred securities that is not exchanged for common shares into new trust preferred securities. These securities will carry an annual coupon of 8 percent.

In connection with the transactions, Citi will suspend dividends on its preferred shares. As a result, the common stock dividend also will be suspended. The company will continue to pay the distribution on its Trust Preferred Securities and Enhanced Trust Preferred Securities at the current rates.

The company will host an investor conference call today at 8:30 am (EST). Dial-in numbers for the conference call are as follows: US & Canada: (877) 700-4194 / International: (706) 679-8401; Conference code: 88132598. A live webcast of the call will be available at Citi’s Investor Relations website: http://www.citigroup.com/citi/fin.

###

Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than 140 countries. Through its two operating units, Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Additional information may be found at www.citigroup.com or www.citi.com.

In connection with the proposed exchange offer, Citi will file with the Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 and a tender offer statement on Schedule TO that will contain a prospectus and related exchange offer materials. Citi will mail the prospectus to the holders of its series of convertible and non-convertible public preferred stock and TruPs and ETruPs that may be eligible to participate in the exchange offer. Holders of these series of preferred stock, TruPs and ETruPs are urged to read the prospectus and related exchange offer materials when they become available because they will contain important information. You may obtain a free copy of the prospectus and related exchange offer materials (when available) that Citi will file with the SEC at the SEC’s website at www.sec.gov. The prospectus and related exchange offer materials (when they become available) may also be obtained for free by accessing Citi’s website at www.citigroup.com and clicking on the link for “Investors” and then clicking on the link for “All SEC Filings” or by contacting Citigroup at the following address or telephone number: Citigroup Document Services, 540 Crosspoint Parkway, Getzville, NY 14068, or within the United States, at +1-877-936-2737 or outside the United States, at +1-716-730-8055, or by e-mailing a request to docserve@citigroup.com.

Contacts

Media:	Jon Diat	(212) 793-5462
	Shannon Bell	(212) 793-6206
	Michael Hanretta	(212) 559-9466

Investors:	Scott Freidenrich	(212) 559-2718

Fixed Income Investors:	Maurice Raichelson	(212) 559-5091

OVERVIEW OF CITI TRANSACTION TO REALIGN CAPITAL STRUCTURE

U.S. Government Preferred Stock Exchange

Target Securities	►TARP Series H Preferred Stock ($25 billion) issued on October 28, 2008
Amount Exchanged	►Amount exchanged will equal the amount of preferred stock of private and public holders and trust preferred securities exchanged, up to $25 billion
Exchange Price	►$3.25/share at par
U.S. Treasury Receives	►Interim securities and warrants (See below)
Remaining Preferreds	►All outstanding preferred stock not exchanged for the interim securities will be exchanged for trust preferred securities with a coupon of 8%
Non-target Securities	►TARP Series I Preferred Stock ($20 billion) issued on December 31, 2008 and Series G ($7 billion) will each convert into separate trust preferred securities with a coupon of 8%

Privately Placed Convertible Preferred Stock Exchange

Target Securities	►Private convertible preferred stock (series A1, B1, C1, D1, J1, K1, L2, N1) initially issued on January 23, 2008
Amount Exchanged	►Target $12.5 billion
Exchange Price	►$3.25/share at par
Investors Receive	►Interim securities and warrants
Remaining Preferreds	►Dividends on outstanding preferred stock not exchanged will be suspended

Publicly Issued Straight and Convertible Preferred Stock and Trust Preferred Securities Exchange

Target Securities	►Public preferred stock (series AA, E, F) issued in January, April and May 2008 ►Public convertible preferred (series T) issued in January 2008 ►Enhanced Trust Preferred Securities ►Trust Preferred Securities
Amount	►Target $14.9 billion
Exchange Price	►$3.25/share at premium to market
Investors Receive	►Common stock
Remaining Preferreds	►Dividends on outstanding preferred stock not exchanged will be suspended ►eTruPS and TruPS distributions remain unchanged

Other Terms

Maximum Exchange Amount	►Total of $27.5 billion of privately placed and publicly issued preferred stock, and trust preferred securities
Exchange Eligibility	►The exchange will accommodate private and public preferred stock ►Depending upon the participation rate in the exchange, TruPS and eTruPS may also be eligible to participate

Interim Securities and Warrants

Securities	►Common equivalent securities mandatorily convertible into common stock on a one-for-one basis upon stockholder vote
Warrants	►Warrants to acquire up to 790 million shares of common stock at $0.01/share

Stockholder Vote

Interim Securities and Warrants Issuance	►No vote is required for the issuance of interim securities and warrants
Authorized Common Stock	►Vote required for charter amendment to increase authorized common stock to permit conversion of interim securities into common stock
If Vote Passes	►Interim securities convert into common stock ►Warrants are cancelled
If Vote Fails	►Interim securities receive greater of dividend on common or dividend of 9%, which increases by 200 basis points every quarter until it reaches 19% ►Warrants become exercisable at any time

Overview of Transaction	Citi will effect public and private offers to exchange each series of outstanding preferred stock and trust preferred securities (TruPS) for the Citi securities described below. The objective of these transactions is to increase Citi’s tangible common equity through the exchange offers described below.

Sequence of Exchange Offers	Citi will conduct separate exchange offers to the USG, the Private Holders and the Public Holders. The exchange offer to USG and the Private Holders will be consummated as promptly as practicable after the announcement of the transaction. The exchange offers to the Public Holders will be launched as soon as practicable in compliance with federal securities laws.

Conditions to USG Participation	USG’s participation in the exchange offer is conditioned on the following conditions: § USG will only convert an amount of preferred stock equal to the amount of preferred stock of the Private Holders and the preferred stock/TruPs of the Public Holders participating in the exchange offers; provided that USG will only participate if at least $11.5 billion of preferred stock held by Private Holders is exchanged; § USG will only convert up to the $25 billion of preferred stock issued under the Capital Purchase Program; § the preferred stock issued under the Targeted Investment Program and the Asset Guarantee Program will be exchanged for a new series of trust preferred securities with the same 8% cash dividend rate as the existing preferred stock; and § USG will receive the most favorable terms and price offered to any holder of preferred stock through the exchange offers.

Exchange Offer to USG	USG will exchange a portion of its preferred stock into the Securities and Warrants. “Securities” means a new series of stock (the “Securities”), created from Citi's blank check preferred stock authority, that is a common stock analog (non-voting with respect to any holder until all necessary government approvals are received for such holder). Pursuant to their terms, the Securities will be mandatorily convertible into common stock on a one-for-one basis based on the number of common stock equivalents represented by the Securities upon effectiveness of the charter amendment described below. “Warrants” means a warrant to acquire shares of Citi common stock for each $1,000 of liquidation preference of exchanged preferred stock, at an exercise price of $0.01 per share. Such Warrant will become exercisable only if the stockholder vote referred to below is not received within 6 months after issuance of the Securities. One Warrant will be issued with

	respect to each Security issued. The number of shares of common stock underlying each such Warrant shall be equal to (x) 790 million divided by (y) the aggregate number of Securities received in the exchange offers by USG and the Private Holders. The common stock and the Securities will be listed for trading, subject to applicable listing requirements. The Securities will all be of the same class. The exchange price to USG will be $3.25 per share (relative to liquidation preference of preferred shares), which is based on an agreed upon trailing average. USG preferred stock to be so exchanged (in connection with the exchange at the closing for the Private Holders, and in connection with the exchange at the subsequent closing for the Public Holders) will be such amount as is equal to the aggregate liquidation preference of the preferred stock of the Private Holders and aggregate liquidation preference/face value of the preferred stock/TruPS of the Public Holders exchanged for Securities/Warrants or common stock, after giving effect to the exchanges described below, provided that the aggregate amount exchanged by USG will not exceed $25 billion. All of the outstanding preferred stock held by USG that is not exchanged for Securities in the program will be exchanged for a new series of trust preferred securities with a coupon of 8% (the “USG Trust Preferred Security”). The other material terms of the USG Trust Preferred Securities will be substantially similar to those of Citi’s traditional TruPS.

Stockholder Vote	No stockholder vote will be required to permit Citi to issue the new Securities or Warrants in the exchange offers (assuming a NYSE waiver of the 20% vote rule). Citi will seek to obtain the requisite stockholder vote for a charter amendment to increase its authorized common stock to permit the conversion of all Securities into common stock and certain other matters (“Stockholder Approval”). If stockholders do not authorize such charter amendment within 6 months after issuance of the Securities, the outstanding Securities will then have a dividend coupon equal to the greater of (x) a cumulative dividend of 9% (increasing by 2% each quarter up to a cap of 19%) or (y) the dividend actually paid per share of common stock. Prior to such time, the Securities will have the same dividend as the common stock. In the event such Stockholder Approval is obtained, such Warrants will automatically expire. The Private Holders participating in the exchange offer will agree to vote any common shares held by them in favor of the charter amendment.

Exchange Offer to Private Holders	Citi will seek to procure the exchange (structured as an exempt exchange offer pursuant to Section 3(a)(9) of the Securities Act) of the preferred stock issued to certain investors (the “Private Holders”) in private placements, for Securities and Warrants. The exchange price to the Private Holders will be $3.25 per share (relative

	to the liquidation preference of their exchanged preferred stock). In addition, Private Holders will receive Warrants. Citi has undertakings from Private Holders of approximately $12 billion of aggregate liquidation preference of such preferred stock that they will exchange their preferred stock into Securities and Warrants. All Private Holders will be given the opportunity to participate in the exchange offer on the basis of the terms applicable to Private Holders as set forth in this Outline.

Exchange Offer to Public Holders	Citi will launch an exchange offer to procure the exchange of the various series of convertible and straight preferred stock and TruPS sold to investors (the “Public Holders”) in multiple offerings up to a maximum of $27.5 billion (liquidation preference/face value) minus the aggregate liquidation preference of all preferred securities exchanged by the Private Holders. If tendered securities exceed the cap, securities will be accepted in the following priorities: (i) first, the convertible and non-convertible preferred securities held by the Public Holders; (ii) second, the enhanced trust preferred securities held by the Public Holders; and (iii) third, the trust preferred securities held by the Public Holders. The exchange price to the Public Holders per share will be based on a percentage of their face value and a per share price of $3.25. In connection with such exchange offers, Citi will announce its current intention not to pay any dividend payments on any such series of preferred stock (other than trust preferred).

Rights Offering to Existing Holders	Citi will explore the possibility of a rights offering to existing shareholders.

Rights Offering to Employees	Citi will explore the possibility of a rights offering to employees providing the right to acquire common stock at $3.25 per share, the terms of which will include four-year vesting and a five-year exercise period, and subject to compliance with applicable federal rules on executive compensation.

Certain Other Agreements	With respect to the Securities and common stock owned by USG, subject to EESA and applicable law, it is anticipated that USG will hold such securities in a trust. Each of USG and the Private Holders that participate in the applicable exchange offer will receive the most favorable terms and price offered to any other preferred holder through these exchange offers or to any common equity holder through any capital raises or rights offerings occurring within the following year.

Foreign Investor Tax Matters	Citi shall not withhold on an exchange of convertible preferred stock for Securities and Warrants pursuant to the exchange offer by a Private Holder that is a foreign person entitled to an exemption from U.S. dividend withholding (an "Exempt Holder"). Other than with respect to amounts attributable to dividend arrearages, if any, Citi shall not withhold in connection with the exchange of convertible preferred stock for Securities and Warrants by a Private Holder that is not an Exempt Holder.