Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, March 19, 2009

Citi Files Registration Statement for Conversion of Preferred into Common, Plans Reverse Stock Split

Citigroup announced that it has filed a registration statement with the SEC in connection with its proposed offer to issue its common stock in exchange for publicly held convertible and non-convertible preferred and trust preferred securities. In addition, the company plans to file shortly two preliminary proxy statements with the SEC. One preliminary proxy proposes to amend Citi's Charter to, among other things, increase the number of authorized shares of its common stock and authorize the Board of Directors to execute a reverse stock split of its common stock. Shareholder approval to increase Citi's authorized shares is not necessary to complete the exchange of private preferred shares for interim securities or to exchange the public preferred shares for common shares. The conversion of interim securities to common shares will be completed upon adoption of the amendment to authorize additional shares. The other preliminary proxy proposes to amend the Charter and the certificates of designation of each series of its public preferred stock to amend the rights of holders of public preferred stock.

As announced on February 27, 2009, Citi is seeking to exchange approximately $27.5 billion in public and private preferred securities with a commitment from the U.S. Treasury to convert up to an additional $25 billion of its preferred securities for common stock. Assuming full participation of public preferred shareholders, Citi will convert into common shares approximately $52.5 billion in aggregate liquidation preference of preferred shares.

Citi also said today it has received New York Stock Exchange (NYSE) approval to proceed with the exchange offers pursuant to the exception from the shareholder approval requirement contained in Section 312.05 of the NYSE's Listed Company Manual.  The Audit and Risk Management Committee of Citi's Board of Directors has approved the use of this exception.

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