- The Washington Times - Wednesday, September 16, 2009

The U.S. Treasury Department and Citigroup Inc. have begun discussing how to sell the 34 percent stake that the government acquired in the rescue of the bank, people familiar with the matter said.

The Treasury, which owns 7.69 billion common shares after a recent preferred-stock conversion designed to shore up the bank’s capital, may start unloading the stake as soon as October, one of the people said. It aims to sell the holdings over the next six to eight months, the person said.

A sale, a year after Lehman Brothers Holdings Inc. filed for bankruptcy, would bring Citigroup Chief Executive Officer Vikram Pandit closer to extricating the company from the bailout program while bringing the government a profit. Because the New York-based bank’s stock price has gained since $25 billion of bailout funds were exchanged for common shares, the Treasury is sitting on a paper profit of $6.69 billion.

“Given the conversion and what’s happened to the stock price, it is likely that the government would make money on it,” said Moshe Orenbuch, an analyst at Credit Suisse Group AG who rates the shares “neutral.”

Citigroup’s stock fell 40 cents, or 8.9 percent, to $4.12 Tuesday on the New York Stock Exchange. That represents a 27 percent premium over the Treasury’s conversion price of $3.25.

The planning is in the early stages, and some transactions may need regulatory approvals, the people familiar with the matter said. Under one scenario, the shares would be sold to public investors in blocks over six to eight months. In another, the government may sell a small amount of stock daily or weekly, said the people, who declined to be identified because the talks are private. Under a third option, the shares would be sold at once in a managed offering.

Treasury spokesman Andrew Williams and Molly Meiners, a spokeswoman for Citigroup, declined to comment.

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