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This excerpt taken from the C DEF 14A filed Jun 18, 2009. USG Preferred Stock), voting together as a class,
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Table of Contentsand a majority of the common stock, voting as a class, are required to approve the Authorized Preferred Stock Increase. In addition, two-thirds of each series of the USG Preferred Stock are required to approve the amendment described in the third bullet of the Dividend Blocker Amendment. The USG has agreed that they will vote their preferred stock and Interim Securities, as applicable, in the same proportion as all other shares of Citigroup’s preferred stock, whether such shares vote in the same class with or as a separate class from the USG Preferred Stock and Interim Securities, with respect to (1) the proposed amendments to our restated certificate of incorporation described in the third bullet of the Dividend Blocker Amendment and (2) the Authorized Preferred Stock Increase. The USG will not vote with respect to any other Public Preferred Stock Amendments or the Common Stock Amendments. For additional information regarding the Preferred Stock Amendments, please refer to the Preferred Proxy Statement, which is a part of the Prospectus. This excerpt taken from the C 8-K filed Jan 16, 2009. USG”)
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On January 15, 2009, Citigroup and USG entered into definitive
agreements with respect to the loss sharing program
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Covered
Asset Pool
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$301 billion of assets1 including loans and securities backed by
residential and commercial real estate, consumer loans and other
assets as agreed by Citigroup and USG. A description of the
assets in the covered asset pool can be found at
www.citigroup.com
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The covered asset pool does not include any
hedges
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Loss
Coverage Period
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5 years for non-residential assets
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10 years for residential assets
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Citigroup
First Loss Position
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$29 billion (as agreed on November 23, 2008), plus $1 billion in
exchange for excluding benefits from hedges, plus $9.5 billion existing
loan loss reserve, for a total Citigroup first loss position of $39.5
billion
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Second
Loss Position
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Absorbed 90% by Treasury, up to its advance of $5 billion, and 10%
by Citigroup
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Third
Loss Position
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Absorbed 90% by FDIC, up to its advance of $10 billion, and 10% by
Citigroup
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Federal
Reserve Loan
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If covered losses exceed Citigroup’s first loss position plus
approximately $16.7 billion (of which $15 billion will have been absorbed
by Treasury and FDIC), the Federal Reserve extends a loan to Citigroup in
an amount equal to the aggregate value of the remaining covered asset pool
as determined in accordance with the loss sharing program (i.e., after reductions
for dispositions, pay-downs, realized losses, etc.)
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Following the loan, as losses are incurred on the remaining covered
asset pool, Citigroup is required to immediately repay 10% of such losses
to the Federal Reserve
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Federal
Reserve Loan
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The Federal Reserve loan is non-recourse to Citigroup, other than
with respect to the repayment obligation referenced above and interest on
the loan. The loan is recourse only to the remaining covered
asset pool which is the sole collateral to secure the loan
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Interest accrues at OIS plus 300bps on the outstanding principal
amount of the loan for the period between the date the loan is made
through November 20, 2018 (which period may be extended by the Federal
Reserve for 1 year)
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Calculation
of Losses
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Loss sharing covers realized losses on the principal amount of the
covered assets (e.g., charge-offs,
dispositions and failure to pay principal, etc.)
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Reserves when taken and marks when made are not covered but losses
on those assets will be covered when realized
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Loss sharing is determined on a portfolio basis (i.e., gains and
recoveries relating to the covered assets are netted against covered
losses across all assets in the portfolio)
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Fee
for Loss Coverage
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$7.059 billion of 8% cumulative
perpetual preferred stock ($4.034 billion to Treasury and
$3.025 billion to FDIC) and a warrant
to Treasury
to purchase 66,531,728 million shares of common stock at
a strike price of
$10.61 per share
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The preferred stock is substantially similar to the preferred stock
issued on December 31, 2008. The term sheet can be found at
www.citigroup.com.
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The warrant is substantially similar to the warrant issued on
December 31, 2008. The term sheet can be found at
www.citigroup.com
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Post-Signing
Confirmation Process
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Composition of covered asset pool, amount of first loss position
and fee for loss coverage subject to final confirmation by USG of, among
other things, qualification of assets, expected losses and
reserves
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Management
of Covered Asset Pool
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The definitive agreements include guidelines for governance and
asset management with respect to the covered asset pool, including
reporting requirements and notice and approval rights of USG at certain
thresholds. If covered losses exceed $27 billion, USG parties
have the right to change the asset manager for the covered asset
pool
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