Citigroup Inc. agreed to buy back $869 million of auction-rate securities it had sold to Hawaii and repay the state for losses on previously liquidated securities, Hawaii's Attorney General Mark Bennett said.

The settlement means Hawaiian taxpayers will lose no principal on their investments in the securities, Bennett said in a statement posted on his official website. Citi admits no wrongdoing, and Hawaii will not pursue claims against it, the statement said.

Since February 2008, Hawaii has liquidated $200 million of the securities, which are backed by pools of federally guaranteed student loans.

The market, which once comprised $330 billion, collapsed in 2008 as banks stopped using their own cash to prop up the auctions. This left investors with bonds they could not sell.

In the agreement with New York's Citigroup, the state can obtain "interim liquidity" on as much as $150 million of the securities at market value from July 2012, according to the attorney general's Nov. 23 statement. The banking company will pay the difference between that market value and par in July 2015.

The settlement will not require a charge for Citigroup because the expected costs are covered under previously accumulated legal reserves, said a person with knowledge of the matter who requested anonymity.

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