The U.S. Treasury intends to unload its 27 percent stake in bailed-out bank Citigroup Inc. using a preset trading plan that will lock the government into a schedule for selling its shares, people with direct knowledge of the matter said.
The program, which may be announced next month, is similar to those used by executives to protect themselves against accusations of insider trading, said the people, who asked not to be identified because the process isn’t final. The Treasury would be able to issue instructions on how many shares to sell, when to sell them and at what price while eliminating concern that the sales are based on non-public information.
“What they are looking to do is to optimize taxpayer return while ensuring market stability,” said Stephen Myrow, a former Treasury official who is now managing director at ACG Analytics Inc., a Washington-based investment research firm.
A sale of the Treasury’s shares, which could be completed this year, would bring Citigroup a step closer to exiting the government’s Troubled Asset Relief Program. The firm had to get a $45 billion infusion of taxpayer money in late 2008 as withering confidence in the bank almost triggered a deposit run.
JPMorgan, Goldman Sachs
As the Treasury completes plans for the sale, it’s also deciding on an investment bank to manage the offering, the people said. Several firms are still in the running, including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, according to the people.
JPMorgan spokesman Brian Marchiony declined to comment, as did Morgan Stanley’s Mark Lake and Goldman Sachs’s Andrea Rachman. Citigroup spokesman Stephen Cohen and Andrew Williams, a Treasury spokesman in Washington, also declined to comment. All four banks are based in New York.
Citigroup applied for the job and offered to do it for a discount, the people said. The bank isn’t likely to get the nod because of the appearance of a conflict of interest. As part of its deal with the government last year to trade some of its preferred shares for common stock, Citigroup agreed to pay for the costs associated with the share sale.
The decision to use a predetermined trading agreement, similar to a 10b5-1 program, makes it likely that the Treasury share sale will begin sometime after the bank announces earnings on April 19, securities lawyers said....MORE