Delaware
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1-9924
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52-1568099
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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399
Park Avenue, New York,
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New
York
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(Address
of principal executive
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10043
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offices)
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(Zip
Code)
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x
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Written communications pursuant to
Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Exhibit Number
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Description | |
99.1
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Press
release, dated February 27, 2009, issued by Citigroup
Inc.
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99.2
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Transaction
Outline
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CITIGROUP INC.
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Dated:
February 27, 2009
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By:
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/s/
Michael S. Helfer
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Name:
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Michael
S. Helfer
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Title:
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General
Counsel and Corporate Secretary
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Exhibit Number
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Description | |
99.1
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Press
release, dated February 27, 2009, issued by Citigroup
Inc.
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99.2
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Transaction
Outline
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·
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Interim
securities and warrants for privately held convertible preferred
securities;
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·
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Interim
securities and warrants for U.S. government-held preferred securities;
and
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·
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Common stock
for publicly held convertible and non-convertible preferred
securities.
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Media:
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Jon
Diat
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(212)
793-5462
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Shannon
Bell
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(212)
793-6206
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Michael
Hanretta
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(212)
559-9466
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Investors:
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Scott
Freidenrich
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(212)
559-2718
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Fixed Income
Investors:
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Maurice
Raichelson
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(212)
559-5091
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Target
Securities
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►TARP Series H Preferred Stock
($25 billion) issued on October 28, 2008
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Amount
Exchanged
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►Amount exchanged will equal
the amount of preferred stock of private and public holders and trust
preferred securities exchanged, up to $25 billion
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Exchange
Price
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►$3.25/share at
par
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U.S.
Treasury Receives
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►Interim
securities and warrants (See below)
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Remaining
Preferreds
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►All outstanding preferred
stock not exchanged for the interim securities will be exchanged for trust
preferred securities with a coupon of 8%
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Non-target
Securities
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►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%
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Target
Securities
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►Private convertible preferred
stock (series A1, B1, C1, D1, J1, K1, L2, N1) initially issued on January
23, 2008
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Amount
Exchanged
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►Target $12.5
billion
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Exchange
Price
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►$3.25/share at
par
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Investors
Receive
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►Interim securities and
warrants
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Remaining
Preferreds
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►Dividends on outstanding
preferred stock not exchanged will be
suspended
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Target
Securities
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►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
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Amount
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►Target $14.9
billion
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Exchange
Price
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►$3.25/share at premium to
market
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Investors
Receive
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►Common
stock
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Remaining
Preferreds
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►Dividends on outstanding
preferred stock not exchanged will be suspended
►eTruPS and TruPS distributions
remain unchanged
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Maximum
Exchange Amount
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►Total of $27.5 billion of
privately placed and publicly issued preferred stock, and trust preferred
securities
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Exchange
Eligibility
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►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
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Securities
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►Common equivalent securities
mandatorily convertible into common stock on a one-for-one basis upon
stockholder vote
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Warrants
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►Warrants to acquire up to 790
million shares of common stock at
$0.01/share
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Interim
Securities and Warrants Issuance
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►No vote is required for the
issuance of interim securities and warrants
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Authorized
Common Stock
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►Vote required for charter
amendment to increase authorized common stock to permit conversion of
interim securities into common stock
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If
Vote Passes
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►Interim securities convert
into common stock
►Warrants are
cancelled
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If
Vote Fails
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►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
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Overview
of Transaction
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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.
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Sequence
of Exchange Offers
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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.
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Conditions
to USG Participation
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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.
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Exchange
Offer to USG
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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
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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.
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Stockholder
Vote
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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.
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Exchange
Offer to Private Holders
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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
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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.
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Exchange
Offer to Public Holders
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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).
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Rights
Offering to Existing Holders
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Citi
will explore the possibility of a rights offering to existing
shareholders.
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Rights
Offering to Employees
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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.
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Certain
Other Agreements
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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.
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Foreign
Investor Tax Matters
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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.
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