The deal guarantees the state’s taxpayers will be made whole by June 2015 plus interest, Hawaii Attorney General Mark Bennett said.

Citigroup agreed to pay back the difference between the market value and the original value of the investments. The investments had lost at least $255 million as of June 2009, or about 25 percent of their value, according to a state audit.

“Despite the fact that market value right now may be way down, we will end up getting par for these,” Bennett said in an interview. “This was a good settlement for the state and the taxpayers.”

Bennett said he would have sued Citigroup over its money management if he couldn’t reach an agreement.

“We’re pleased to provide this liquidity solution to the state,” Citigroup spokesman Alexander Samuelson said in a statement. “We value our relationship with the state of Hawaii.”

Hawaii currently owns $869 million in the securities after it liquidated about $200 million worth of the securities at their initial value since February 2008.

Citigroup’s payment could provide an influx of cash to the state, and it will be up to whoever is governor at the time to decide how to use it, Bennett said.

A report by state Auditor Marion Higa claimed Gov. Linda Lingle’s top budget aides may have violated state law by investing in securities that didn’t mature within five years. Bennett disputes the assertion, saying the securities were originally sold to the state as liquid assets.

“This agreement makes sense for Hawaii,” Georgina Kawamura, director of the Hawaii Department of Budget and Finance, said in a statement. “Our goal in these negotiations has been to assure that our taxpayers will not receive less than par on these investments, and this agreement provides for that.”

Annual interest rates on the securities currently amount to about 1.8 percent, but it’s difficult to predict how much Citigroup will pay Hawaii in interest by 2015, Bennett said.

The settlement gives the state the ability to obtain interim liquidity on its securities of up to $150 million at market value starting in July 2012, with the difference between that market value and par paid by Citigroup in 2015.

If the securities somehow gain value by 2015, the state wouldn’t be obligated to sell them, Bennett said.

The agreement absolves potential legal claims against Citigroup and any affiliated entities or individuals in connection with its investments.

Citigroup admits no wrongdoing in the settlement.