From the April 2009 issue of the CDx3 Newsletter (free, what's this?)
On February 27 Citigroup announced that it was exercising its right to convert three of its fourteen preferred stock issues to common stock. These three issues (C-I, C-P and C-M) were "convertible" preferred stocks which means that the issuer (Citi) has the right to convert them to common stock shares in accordance with the terms of the prospectuses for these issues. Citi did so on February 27, 2009.
Note that only four of Citi's preferred stocks qualify as CDx3 Preferred Stocks and none of these four were included in Citi's February conversion. The CDx3 Selection Criteria (Preferred Stock Investing, 3rd Ed. chapter 7) protected CDx3 Investors from this conversion.
In early March, Citi filed with the SEC for a new, separate preferred stock conversion program. This additional program has nothing to do with their February 27 preferred stock conversion. Rather, the new program relates to the remaining eleven trust preferred stocks (TruPS and ETruPS) from Citi.
Under the March 2009 filing, Citi is going to invite holders of the remaining eleven Citi preferred stocks to voluntarily convert their preferred stock shares to common stock shares. Those who decline Citi's kind offer will continue to receive their dividend payments just as they would have otherwise. To compensate those who choose to volunteer for giving up the ongoing dividends that they would otherwise be earning, Citi is going to offer a very handsome conversion ratio, leaving volunteers with common stock that is worth several times the current market value of their preferred shares.
The timing of the voluntary conversion offer is unclear but if you hold Citi preferred stocks you hould receive a communication from Citi (via your broker) explaining the new voluntary program.
