After a frenetic weekend to save another U.S. financial institution, Citigroup received the following support late Sunday night from the U.S. government:
- $20 billion capital injection with government receiving preferred shares paying an 8% dividend (after a $25 billion capital injection last month).
- Government guarantees on $306 billion of risky Citigroup assets which includes commercial real estate, leveraged loans and other assets
- Citigroup absorbs first $29 billion of losses and then 10% of any losses above that.
- Treasury, FDIC and Federal Reserve absorb rest of losses (up to $250 billion)
- Government earns $7 billion fee for this guarantee (in preferred shares)
- Treasury, FDIC and Federal Reserve absorb rest of losses (up to $250 billion)
- Citigroup absorbs first $29 billion of losses and then 10% of any losses above that.
- Government is also getting warrants to buy $2.7 billion in Citigroup common stock at $10.61 per share, stated the Reuters article.
The market welcomed this news, which combined with announcements of Obama's economic team and his stimulus plans, led to a sharp rally in financial stocks and the overall market. Another crisis averted....for now.
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