Citigroup said to be seeking private funds to keep control

Citigroup Inc, girding for results of the Federal Reserve's bank stress test, may try to wring capital from private investors instead of US bailout funds as a way of bolstering equity without ceding control to the government, people briefed on the matter said.

Regulators have indicated to the New York-based bank, which got a $52 billion rescue last year, that another taxpayer-funded cash infusion won't be required, according to one of the people, who asked not to be identified because the talks aren't public. Discussions now center on how much of the government's preferred shares in the firm must be converted into common stock, the person said. Under a plan set in February, the government would convert as much as $25 billion of its stake, for a 36 percent voting interest.

Getting money from private backers may help Citigroup dissuade the Treasury Department from converting all or part of its remaining $27 billion investment, a step that may increase the government's ownership to more than 50 percent and nationalize what was once the biggest US bank. One likely solution for the company would be to convert $10 billion of privately held securities that could easily be added to the pending exchange, said Kevin Starke, who analyzes bank capital structures for hedge-fund clients of CRT Capital Group LLC.