Treasury to sell Citigroup preferred securities

WASHINGTON (Reuters) - The Treasury Department said on Wednesday it was selling a portion of the $2.2 billion in trust preferred securities it received from Citigroup C.N in return for agreeing to share potential losses on a pool of assets the bank held.

Treasury agreed in January 2009 to share the potential losses but no payment was ever made and no further obligation to do so exists, so all proceeds will be a net gain for taxpayers, the department said.

Treasury said it intends to sell the Citigroup preferred securities for not less than par value plus any accumulated and unpaid distributions. The actual portion of the $2.2 billion sold will depend upon market conditions, the department said.

BofA Merrill Lynch, JPMorgan, Morgan Stanley, UBS Investment Bank and Wells Fargo Securities will act as joint lead managers for the offering, essentially soliciting bids rather than conducting an auction.

A Treasury official said that, if the entire $2.2 billion was sold, it would bring total revenues received under the Troubled Asset Relief Program, or TARP, to nearly $228 billion from the current total of $226 billion.

When Treasury entered the agreement with Citigroup in early 2009, the Federal Deposit Insurance Corp and the Federal Reserve also joined to offer a kind of insurance against Citigroup losses over a five- to 10-year period.

In December 2009, the loss-sharing arrangement was terminated at Citigroup’s request so Treasury is now disposing of the securities that it holds.

Reporting by Glenn Somerville, Editing by Chizu Nomiyama