Citicorp

Citigroup Offers Reverse Split
Citigroup on Thursday said it may conduct a reverse stock split as part of an exchange offer that could give U.S. taxpayers a 36 percent stake in the bank.

Citigroup, [C 2.709 -0.371 (-12.05%) ] which took $45 billion from the government's Troubled Asset Relief Program, also defended spending $10 million to renovate executive offices at its Park Avenue headquarters, saying the project will save more than it costs.

Chief Executive Vikram Pandit is trying to restore the third-largest U.S. bank to health after $37.5 billion of losses over five quarters, largely from exposure to housing-related and complex debt.

Citigroup shares slid below $1 two weeks ago, despite three U.S. attempts to prop up the bank since October, and the bank has eliminated its common stock dividend.

The shares rose 37 cents to $3.45 in morning trading. They traded above $50 as recently as July 2007.

As part of a Feb. 27 government bailout, Citigroup is offering to exchange common stock for up to $27.5 billion of its preferred shares at $3.25 per share.
The government would match up to $25 billion of the exchange. Citigroup will also seek shareholder approval to conduct a reverse stock split. It proposed seven possible exchange ratios, ranging from 1-for-2 to 1-for-30.

It said a split could take place before June 30, 2010. Reverse splits reduce shares outstanding and are often used to boost low share prices. The value of investors' holdings does not change.

Citigroup and its predecessors conducted seven regular stock splits between 1993 and 2000, but none since.

Following the move, Citigroup's tangible common equity ratio (TCE ratio) - a measure of the financial soundness of banks more conservative than the more widely-used capital adequacy ratio – would likely rise to $81 billion from $29.7 billion at the end of last year, the bank said.

The preferred stock exchange would not give Citigroup more cash but would bolster capital. Chief Financial Officer Gary Crittenden wrote in a letter to investors that a successful exchange is also "critical in protecting market confidence in the company."

Citigroup has 5.5 billion shares outstanding and said the exchange could increase that number to between 13 billion and 21 billion, depending on how many investors participate.

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