NEW YORK (MarketWatch) -- Citigroup Inc said on Wednesday that it has finalized an agreement with the U.S. government under which the latter will exchange up to $25 billion of Citi preferred securities for interim securities and warrants.

The bank /quotes/comstock/13*!c/quotes/nls/c (C 3.53, +0.12, +3.52%) said it would convert the balance of preferred securities and the balance of the Citi preferred shares that the government owns into trust preferred securities. The company said it will also now begin previously announced tender offers for publicly held convertible and non-convertible preferred and trust securities.

Citi said the moves would create about $58 billion of new common shares.

"Following completion of the exchange offers, Citi will be among the best capitalized banks in the world," Citi Chief Executive Vikram Pandit said in a press release.

Citi, which has received a series of infusions from the government, also said that its board voted unanimously to adopt a tax benefits preservation plan to protect its ability to use certain tax assets.

Currently, Citi said, its ability to take advantage of tax credits from past losses could be "substantially limited" if there is a change of ownership for the firm. The company said the crux of the plan is to discourage any current shareholders from raising their Citi stake to more than 5%, or any prospective shareholders from buying 5% or more of the firm's common shares.

As part of the plan, Citi said it declared a rights offering of one preferred stock purchase right for each share of its common stock and interim securities.

"The tax benefits preservation plan will be in effect for only 36 months, in contrast to traditional rights plans that generally last 10 years. Additionally, the plan does not apply to U.S. Government acquisitions of Citi common stock," the company added in its press release.