The Treasury Department’s refusal to sell its 34% ownership stake in Citigroup (NYSE: C) is preventing the bank’s plans to repay nearly $20 billion worth of loans under the Troubled Asset Relief Program, according to several sources.
Executives at the New-York based firm are becoming increasingly frustrated because they are unable to sell stock to raise funds for repayment until the Treasury Department indicates how it plans on unloading its 7.7 billion shares in the company. Investors may be reluctant to buy shares in Citigroup because a potential Treasury sale could drive down its sharp rice.
According to Oppenheimer analyst Chris Kotowski, “The ball is in the government’s court.” Kotowski currently has a “market perform” rating on Citigroup’s shares. “It’s not Citibank’s decision to sell them or not sell them,” said Kotowski.
For the last three months, executives at the bank have attempted to persuade the Treasury department to move ahead with the sale. At the current market rate, the Treasury’s shares are worth about $31.2 billion. Because the common shares were converted from $25 billion worth of bailout funds, the Treasury Department would see a gain of about 25% or more than $6 billion.
Treasury spokeswoman Meg Reilly declined to comment about whether or not the government has sold any Citigroup shares or when it might do so. Reilly said in a recent statement, “Treasury does not comment on individual institutions as a general policy.”
The Treasury Department hasn’t told Citigroup how or when it plans to sell the stock. The shares are currently held within the Treasury Departments’ Office of Financial Stability, run by Herb Allison, who is the former CEO of TIAA-CREF, a retirement services form. Allison reports directly to Treasury Secretary Timothy Geithner.
Citigroup received $45 billion from last year’s $700 billion Troubled Asset Relief Program operated by the US Treasury. In September, $25 billion of those bailout funds were converted into common stock, which the Treasury Department is free to sell at any time.