Citigroup (C Quote) on Thursday completed the first half of its much-discussed exchange offer that will make the U.S. government its largest stakeholder.

The New York-based financial institution, which has received $45 billion from the Troubled Asset Relief Program last year, said that private preferred holders of roughly $12.5 billion worth of convertible preferred securities were exchanged for interim securities and warrants on Thursday.

The U.S. government, which agreed to exchange up to $25 billion worth of preferred securities, completed half of that on Thursday by exchanging $12.5 billion of non-convertible preferred securities for interim securities and warrants. It will also exchange its remaining preferred securities into trust preferred securities bearing an annual coupon of 8%, the company said. Once completed, the government will own approximately 34% of the troubled financial institution.