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(AP) - Citigroup Inc. said Friday it reached a deal
that will give the government up to a 36 percent stake in the
struggling bank.

      The government, along with other private investors, will convert
some of their preferred stock in Citi to common shares.


      Citi will offer to exchange up to $27.5 billion of its existing
preferred stock held by private investors at a conversion price of
$3.25 per share, a 32 percent premium over Thursday's closing price
of $2.46. 

The government will match up to $25 billion of preferred
stock it currently owns for conversion at the same price.


      If the maximum amount of preferred stock is converted, current
common stockholders will see their ownership stake fall to about 26
percent.


      The conversion will help provide Citi the mix of capital to
withstand further weakening in the economy.


      The Government off Singapore Investment Corp., Saudi Arabian
Prince Alwaleed Bin Talal, Capital Research Global Investors,
Capital World Investors are among the private investors that said
they would participate in the exchange.


      One of the hardest hit banks by the ongoing credit crisis, Citi
has already received $45 billion in cash from the government and
guarantees protecting it from the bulk of losses on $300 billion of
risky investments.


      Under the exchange agreement, the Treasury Department's
remaining $20 billion in preferred shares will be converted into a
more senior preferred stock that carries an 8 percent cash dividend
rate.


      Citigroup said the increase in government ownership will not
require additional taxpayer money. The government currently holds
about an 8 percent stake in Citi.


      As part of the agreement, Citi will suspend dividends on both
its common stock and preferred shares.


      Citi will also reshape its board of directors, Richard Parsons,
the bank's chairman, said in a statement. The board will have a
majority of new independent directors as soon as possible, Parsons
added.


      The company also said it recorded a goodwill impairment charge
of about $9.6 billion due to deterioration in the financial
markets.


      The goodwill charge was added to Citi's 2008 results along with
a $374 million impairment charge tied to its Nikko Asset Management
unit. The charges resulted in Citi revising its 2008 loss to $27.7
billion, or $5.59 per share.


      Shares of Citi tumbled 56 cents, or 22.7 percent to $1.90 in
premarket trading.
      

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Citigroup Inc. said Friday it reached a deal
that will give the federal government up to a 36 percent stake in the struggling bank.

Citigroup reaches aid deal with government

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