Citi takes big step to giving U.S. 34 percent stake

NEW YORK (Reuters) - Citigroup Inc (C.N) on Thursday said it has completed a $25 billion securities exchange, a key step toward eventually giving the U.S. government a 34 percent equity stake in the bank.

The New York-based lender is conducting a series of exchange offers on $58 billion of securities, as part of a federal bailout designed to bolster the bank's capital.

Public and private investors are exchanging up to $33 billion of securities for common stock, while the government is exchanging up to $25 billion of its own securities.

Citigroup is conducting the exchange offers after heavy losses led to a series of federal bailouts, including $45 billion of taxpayer money, for the third-largest U.S. bank.

The bank is the most troubled of the nation's largest lenders, after credit losses and writedowns led to $37.5 billion of net losses in the 15 months ended in December.

Citigroup said private holders of $12.5 billion of convertible preferred securities agreed to swap them for securities expected to convert to common stock.

The government matched this by swapping $12.5 billion of its own non-convertible preferred shares for the securities.

An exchange offer for publicly held preferred securities, also with a government match, is set to expire on Friday.

Both offers are expected to close late this month.

In afternoon trading, Citigroup shares rose 3 cents to $2.83 on the New York Stock Exchange

(Reporting by Jonathan Stempel; editing by John Wallace)