By COSTAS PARIS
SINGAPORE -- The Government of Singapore Investment Corp. favors keeping its preferred shares in Citigroup Inc. but is examining all options as the U.S. Treasury is close to an agreement to convert some of its own preferred shares in the bank into common stock, a person familiar with the situation said Friday.
"They (GIC) want to keep the preferred shares because of the coupon payment, but after the latest developments they are examining all options," this person told Dow Jones Newswires.
The U.S. government will convert its preferred stock in Citigroup only to the extent that the bank can persuade private investors, including sovereign wealth funds like GIC, to do the same, people familiar with the matter said. The Treasury will match the private investors' conversions dollar-for-dollar up to $25 billion in what could result to a stake of up to 40% in Citigroup, these people said.
GIC could not immediately be reached for comment.
GIC invested US$6.88 billion in preferred Citi shares in January 2008. It gets a 7% annual coupon on its investment.
According to a Securities and Exchange Commission filing in late January, GIC now owns a beneficial 5.3% stake, or 303.8 million shares in Citigroup. These include preferred shares that can be converted into 261.1 million common shares. Based on Citi's US$2.46 last closing price Thursday, the stake is worth US$747.3 million.
The person familiar with the situation said that even though GIC would rather hold on to its preferred stock, it may eventually have to convert at least some of its holding.
"The options include converting part of the preferred holdings into common stock, getting more (common) shares than entitled if the conversion happens, or a combination of the two. GIC will also examine what the other investors do," the person said.
Apart from GIC, Citi's other big private investors include Abu Dhabi Investment Authority and Kuwait Investment Authority.
Citigroup has already begun having conversations with their preferred shareholders about the conversion, people familiar with the matter said.
Details of the Citigroup-U.S. pact remain unclear. Chief among those uncertainties is the price the government will pay, because it depends largely on the position taken by private investors. Citigroup shares closed Thursday at $2.46 in New York Stock Exchange trading.
"With such huge losses at hand in case of a conversion, any deal must be sweetened up quite bit for GIC to go along," the person said.
Source online.wsj.com/article/SB123571952823892431.html?mod=googlenews_wsj
SINGAPORE -- The Government of Singapore Investment Corp. favors keeping its preferred shares in Citigroup Inc. but is examining all options as the U.S. Treasury is close to an agreement to convert some of its own preferred shares in the bank into common stock, a person familiar with the situation said Friday.
"They (GIC) want to keep the preferred shares because of the coupon payment, but after the latest developments they are examining all options," this person told Dow Jones Newswires.
The U.S. government will convert its preferred stock in Citigroup only to the extent that the bank can persuade private investors, including sovereign wealth funds like GIC, to do the same, people familiar with the matter said. The Treasury will match the private investors' conversions dollar-for-dollar up to $25 billion in what could result to a stake of up to 40% in Citigroup, these people said.
GIC could not immediately be reached for comment.
GIC invested US$6.88 billion in preferred Citi shares in January 2008. It gets a 7% annual coupon on its investment.
According to a Securities and Exchange Commission filing in late January, GIC now owns a beneficial 5.3% stake, or 303.8 million shares in Citigroup. These include preferred shares that can be converted into 261.1 million common shares. Based on Citi's US$2.46 last closing price Thursday, the stake is worth US$747.3 million.
The person familiar with the situation said that even though GIC would rather hold on to its preferred stock, it may eventually have to convert at least some of its holding.
"The options include converting part of the preferred holdings into common stock, getting more (common) shares than entitled if the conversion happens, or a combination of the two. GIC will also examine what the other investors do," the person said.
Apart from GIC, Citi's other big private investors include Abu Dhabi Investment Authority and Kuwait Investment Authority.
Citigroup has already begun having conversations with their preferred shareholders about the conversion, people familiar with the matter said.
Details of the Citigroup-U.S. pact remain unclear. Chief among those uncertainties is the price the government will pay, because it depends largely on the position taken by private investors. Citigroup shares closed Thursday at $2.46 in New York Stock Exchange trading.
"With such huge losses at hand in case of a conversion, any deal must be sweetened up quite bit for GIC to go along," the person said.
Source online.wsj.com/article/SB123571952823892431.html?mod=googlenews_wsj
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