On the heels of the news that 10 banks will be paying back their bailout money, Citigroup Inc. announced that it is launching exchange offers to convert up to US$58 billion of preferred securities into common stock.

Citi announced that it has finalized an agreement that will see the U.S. government exchange a portion of its preferred securities with an aggregate liquidation value of up to $25 billion for interim securities and warrants and its remaining preferred securities for trust preferred securities. That agreement is part of an exchange offer, which could, assuming full participation of holders of convertible and non-convertible public preferred and trust preferred securities, see Citi convert approximately $58 billion of preferred securities into common stock.

After completion of the exchange offers, the bank’s tangible common equity could increase by up to $61 billion, and Tier 1 Common may increase by up to approximately $64 billion, noted Ned Kelly, Citi’s CFO.

“Following completion of the exchange offers, Citi will be among the best capitalized banks in the world,” said Vikram Pandit, CEO of Citi. “We have the right strategy, the right structure and the right people. I’m confident that we will continue to make progress and that the strength of our franchise will be evident as the economy improves.”

Citi also announced that its board of directors has unanimously adopted a “tax benefits preservation plan” to protect the company’s ability to utilize certain tax assets, which is designed to reduce the likelihood that Citi experiences an ownership change that would limit that ability.

The plan is to discourage any person or group from becoming a 5% shareholder and dissuading existing 5% shareholders from acquiring more than a minimal number of additional shares of Citi stock, it said. As part of the plan, the board declared a dividend of one preferred stock purchase right for each outstanding share of common stock and interim securities, which are the securities issued in connection with the exchange offers. If triggered, each right entitles the holder to purchase preferred stock at a 50% discount to the market price of the common stock.

The plan will be in effect for only 36 months and does not apply to U.S. government acquisitions of Citi common stock.