Citigroup's Mandatory Convertible: As a financial services firm considers a recapitalization during a global credit crisis, what instrument would be the least costly to itself and its shareholders?
Citigroup's Mandatory Convertible: As a financial services firm considers a recapitalization during a global credit crisis, what instrument would be the least costly to itself and its shareholders?
In October 2007 Citigroup delivered disappointing quarterly results impacted by a deteriorating global debt market, leading to write-downs and increasing credit costs. The financial services giant believed the challenging backdrop would continue, prompting its executives to focus on the company's balance sheet and whether new equity injections might be needed. Senior management and the board considered its recapitalization options, including an organic build of equity through retained earnings, before focusing on mandatory convertibles. In this case students examine the impact and structure of the mandatory convertible offering.
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