E*Trade Financial

(ETFC) - Get Report

on Monday launched a $1 billion debt exchange offering as part of its

capital restructuring plan

announced last week.

The exchange offer is subject to certain conditions, including the completion of the company's

public stock offering commenced

last week as well as shareholder and regulatory approval.

Citadel Investment Group, E*Trade's largest stock and bondholder, has agreed to participate in the debt exchange offer. Citadel, whose founder and CEO Ken Griffin recently took up a seat on E*Trade's board of directors, also purchased 90.9 million shares through the stock offering. Citadel now owns 17% of E*Trade's shares.

E*Trade is offering to exchange more than $1 billion of convertible debentures due in 2019 for all of its 8% senior notes due in 2011. The company is also offering the exchange to holders of a portion of its 12.5% springing lien notes due in 2017, it said.

The company is offering to exchange $1,000 principal amount of debentures for every $1,000 principal amount of the notes tendered in the exchange offer.

E*Trade reiterated that its debt exchange offer will unload the brokerage firm of its significant debt service burden by eliminating the interest paid on those debt securities, it said. These securities will have a maturity of 10 years and can be converted into shares of common stock at an initial price of $1.034 a share for Class A debentures and $1.551 a share for Class B debentures.

Citadel has agreed to exchange at least $800 million worth of the company's long-term debt.

Shares were up 2 cents to $1.28 in recent trading.