U.S., Citigroup in third bailout deal

NEW YORK, Feb. 27 (UPI) -- U.S. officials and Citigroup Inc. have agreed on a plan for the government to take a 30 percent to 40 percent stake in the company.

The U.S. Treasury announced Friday that the deal doesn't require additional government funds but requires Citigroup to match a conversion of preferred securities to common equity "dollar for dollar" with other preferred stockholders.

Citigroup also informed the Treasury it would shake up its board of directors, finding "new independent directors as soon as feasible," the Treasury said.

The deal calls for Citigroup Chief Executive Officer Vikram Pandit to remain, The New York Times reported.

How far Citigroup can push the deal is unknown but the Treasury agreed to convert up to the $25 billion of preferred stock it was issued under the Capital Purchase Program.

Citigroup Monday proposed that the U.S. government convert its bank shares to common stock, greatly increasing government ownership of the bank. The government owns $45 billion in Citigroup preferred shares, roughly 8 percent of the bank.

A conversion to common stock wouldn't involve more taxpayer funding but it would substantially dilute common stock values, The Wall Street Journal said.