As expected, Citigroup has finalized a deal that calls for Uncle Sam to convert $27.5 billion in preferred stock to common stock, according to media reports. This would lift the government's stake to about 36 percent. Citigroup will become the only big bank in which the government will own a big stake. Current shareholders face some significant dilution, but the move will create additional capital and help Citigroup satisfy the terms set forth by the stress tests. Distribution of the new common shares was set for July 30. 

There are still a lot of questions. Does this mean that Vikram Pandit has survived? Has Sheila Bair lost a power struggle to Tim Geithner? It's hard to say. Perhaps the biggest question still unresolved is whether and how Citigroup will repurchase the warrants it gave the government as part of the preferred share purchase. 

For more:
- here's a MarketWatch article

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