Treasury Department to Sell $2.2 Billion of Citigroup Trust Preferred

Citigroup filed a Form 424B2 Prospectus on 10/4/10 in connection with the underwritten offer of 7.875% Fixed Rate/Floating Rate Trust Preferred Securities (TruPS®) held by the government (SEC file no. 333-157459).  The United States Department of the Treasury acquired the capital securities from Citigroup in connection with Citigroup’s participation in the Troubled Asset Relief Program (TARP). 

On January 15, 2009, Citigroup entered into a loss-sharing arrangement with Treasury, the FDIC and the Federal Reserve related to a pool of $301 billion of assets (see Exhibit 10.1 of the Citigroup Form 8-K filed 1/16/09, file no. 1-9924).   Citigroup paid the Treasury and the FDIC a premium in the form of securities for their willingness to share potential losses over a five to ten year period.  The loss-sharing arrangement was terminated on December 23, 2009 at the request of Citigroup (see Exhibit 10.1 of the Form 8-K filed 12/24/09).  Treasury kept $2.2 billion of the premium, which was originally $4 billion in securities.

The underwriting agreement pertaining to the trust preferred shares was filed with the Citigroup Form 8-K filed October 5, 2010.  Each share represents an undivided beneficial interest in the assets of Citigroup Capital XIII, which consist of junior subordinated debt securities of Citigroup.  In the tax opinion filed with the 8-K, Skadden, Arps, Slate, Meagher & Flom LLP states that "while there is no authority directly on point and the issue is not free from doubt, the Junior Subordinated Debt Securities held by the Trust will be classified for United States federal income tax purposes as indebtedness of (Citigroup Inc.)".