Business and Capital Market Analysis !!!

The US government agree to the rescue of Citigroup, entering an agreement to guarantee up to $306bn in problematic assets and inject $20bn cash in capital, adding to the $25bn the company received last month under the Troubled Asset Relief Program (TARP) to restore confidence in a bank that defines the term "Too Big to Fail".

Under the terms of the arrangement, the US Treasury will receive dividends at a rate of 8 per cent annually. On top of that amount, Citi is receiving an additional $7bn in return for preferred shares issued to both the Treasury and the Federal Deposit Insurance Corporation for their roles in guaranteeing the risky assets.

In addition to the $27bn capital infusion, the reconstruction of Citi’s balance sheet in effect frees up an additional $13bn, so the total capital benefit to Citi will be $40bn.

Following the agreement Citi promised to cut its dividend to 1 cent a share and to abide by restrictions on certain types of executive compensation.


Sources :

1. FT.com : US agrees bail-out for Citigroup | Last updated: November 24 2008 10:53.
2. Bloomberg : Citigroup Gets Guarantees on $306 Billion of Assets (Update3) | November 24, 2008 05:57 EST.