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(Reuters) - The US Treasury said on Monday it was launching its plan to sell off its 7.7 billion share stake in Citigroup "in an orderly fashion", another step in the withdrawal of the government as a major stakeholder in the company.
The Treasury said in a statement it had given Morgan Stanley, its sales agent, discretionary authority to sell up to 1.5 billion common shares under certain parameters set out in a pre-arranged written trading plan.
The Treasury said it expected to provide Morgan Stanley with the authority to sell more shares after the initial amount.
The US government owns 27 percent of the bank's shares, a stake it acquired through $45 billion in bailouts to strengthen the bank's capital base in 2008 and 2009. Citi has paid back $20 billion in preferred shares, but another $25 billion was converted to common stock last year.
Shares of Citi fell 1.7 percent to $4.77 in premarket trade shortly after the Treasury's announcement. If the shares are sold around that price, the Treasury could still make a profit of some $12 billion on its Citi common stock holdings, as it acquired the shares at a conversion price of $3.25 each.
The Treasury's statement did not disclose the parameters that would determine the share sales. However, the Morgan Stanley pre-set trading plan does not include the Treasury's holdings of Citigroup Trust Preferred Securities nor warrants to purchase Citi common stock.
Under the Treasury's sales agreement with Morgan Stanley, the bank can earn between $23.577 million and about $134 million for selling all 7.7 billion shares. The Treasury will pay Morgan $0.003 for each Citi share sold electronically and $0.0175 for each share sold via other methods.
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