Two senior Citigroup executives told a group of investors the bank will only pay back government funds this month if it is comfortable with regulators' demands and market conditions, two people at the meeting said.

The comments at a closed meeting on Thursday imply that although Citigroup Inc is keen to pay back government money this month, it is willing to wait until the new year for a deal if it is not satisfied with the terms the government is offering.

Investors are carefully watching the timing of Citigroup's exit from the government's Troubled Asset Relief Program, because, if the bank can leave by year end, it may be able to avoid pay restrictions on its top 100 employees.

Avoiding pay restrictions could help the bank attract and retain employees, who in turn could help bring the long-ailing bank back to real profitability. The Obama administration's pay czar released a new round of compensation restrictions on Friday.

On Thursday, Sanford C. Bernstein organized a breakfast with a group of investors and Citigroup Vice Chairman Edward Ned Kelly and Chief Financial Officer John Gerspach.

They basically said they would pay back TARP if they could do it in good conscience, a person at the meeting said.

The breakfast was organized two months ago. Citigroup declined to comment.

Sources told Reuters earlier this week the bank is looking to sell roughly $15 billion of common stock to help repay the $20 billion of trust preferred securities the U.S. government owns.

But a person familiar with the matter also said on Thursday it was not clear whether a deal is imminent, because the U.S. Treasury is more open to the bank's plan than the Federal Deposit Insurance Corp.

Time is running out for Citigroup this year. As the month wears on, selling shares gets increasingly difficult, because fewer and fewer investors are still at their desks and looking at deals.

Realistically, I would think they would have to do it next week, if they're going to do it this year, said Bill Fitzpatrick, an analyst covering financial stocks at Optique Capital Management in Milwaukee.

Two investors argued that selling at any time after Wednesday, December 16 would be difficult.

You need for there to be liquidity in the market and, after the middle of next week, that'll be hard, said one investor, who is not authorized to speak to the press.

QUIET PERIOD A RED HERRING

Most companies enter a quiet period around the 15th day of the final month of the quarter. During a quiet period, company officials refrain from talking about the company's performance to avoid giving out material nonpublic information.

But a company can still issue shares during a quiet period, as long as it discloses any material information it has about its performance during the quarter, said Brinkley Dickerson, a securities lawyer at Troutman Sanders in Atlanta.

A company can sell securities whenever it wants, Dickerson said. The only rule it has to follow is when it has to sell securities, market has to be fully informed about anything that's material.

Citigroup is negotiating a broader plan for paying back rescue money it received over multiple bailouts. That includes determining how the government will sell off the roughly $30 billion of Citigroup common shares it owns and figuring out how to end the guarantee that the government offered to Citigroup on a portfolio of assets that was originally some $300 billion.

(Reporting by Dan Wilchins; editing by Andre Grenon)

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