The U.S. Department of the Treasury announced today that it will sell trust preferred securities (TRUPS®) received from Citigroup pursuant to the Asset Guarantee Program (AGP). Any proceeds received from the sale will represent a net gain or profit to the taxpayer. Treasury intends to sell the TRUPS® for not less than par value plus any accumulated and unpaid distributions.
These securities were received in consideration for Treasury's agreement in January 2009 to share potential losses on a pool of $301 billion of assets held by Citigroup. The loss-sharing arrangement, essentially a form of insurance, also involved the Federal Deposit Insurance Company (FDIC) and the Federal Reserve. 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. In December 2009, the loss-sharing arrangement was terminated at the request of Citigroup. Treasury kept $2.2 billion of the premium (which was originally $4 billion in securities). Because Treasury was never required to make any payment under the arrangement and has no further obligation to do so, all proceeds from the sale will constitute a net gain to the taxpayer under the program.
This offering does not include $800 million in TRUPS® held by the FDIC that the FDIC is required to turn over to Treasury, unless it incurs any losses on debt of Citigroup guaranteed by the FDIC under the Temporary Liquidity Guarantee Program. It also does not include the warrants for Citigroup's common stock that were also issued as part of Citigroup's participation in AGP and other Treasury programs. Any proceeds from the ultimate sale of those securities will represent additional gain to the taxpayer. The offering also does not include Treasury's shares of Citigroup's common stock which Treasury has been disposing of separately.
BofA Merrill Lynch, J.P. Morgan, Morgan Stanley, UBS Investment Bank, and Wells Fargo Securities will act as joint lead managers for the offering. Citigroup Global Markets Inc. will act as global coordinator but not as an underwriter or a sales agent.
A preliminary prospectus relating to the offering was filed with the SEC on September 29, 2010, and a final prospectus will be filed by the Company with the SEC and will be made available on the SEC's website http://www.sec.gov.
Copies of the preliminary prospectus relating to these securities may be obtained, when available, from Morgan Stanley, Attn: Prospectus Department, 180 Varick Street, New York, NY 10014, by emailing prospectus@morganstanley.com or by calling toll-free in the United States 1-866-718-1649. Before you invest, you should read the prospectus and other documents the Company has filed with the SEC for more complete information about the Company and the securities.
This news release shall not constitute an offer to sell or the solicitation of an offer to buy.
