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Abu Dhabi Pumping $7.5B Into Citibgroup.

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hc
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Joined: Apr 04, 2007
Posts: 4545

Posted: Nov 28, 2007 - 02:39 AM
Post subject: Abu Dhabi Pumping $7.5B Into Citibgroup.

Abu Dhabi Pumping $7.5B Into Citi
Liz Moyer, 11.26.07, 11:31 PM ET

Citigroup is still in search of a chief executive, but it has found an angel.

The Abu Dhabi Investment Authority is sinking $7.5 billion into the largest U.S. bank, shoring up its capital after billions in write-offs related to subprime mortgages.

The state investment fund will receive securities that will be convertible into no more than a 4.9% stake in Citi, the financial services giant said Monday night. It is a sizeable investment at a time when many investors and pundits are calling for major changes at Citigroup, including a possible breakup of the company. (See: “Citi: Size Doesn’t Matter”)

One of Citi’s largest individual shareholders, Saudi Arabia’s Prince Alwaleed bin Talal, who is said to hold about a 4% stake, has pressed for tighter cost controls at the company since last year. Chief Executive Charles Prince quit earlier this month as Citi faced another $10 billion to $13 billion of additional write-downs in mortgage security holdings and after losing the confidence of the board and major shareholders. (See: “Another Wall Street Chief Falls”)

A search committee led by Citi director and ex-Treasury head Robert Rubin has yet to come up with a successor, adding more downward pressure to Citi shares, which have declined 20% since the beginning of November. John Thain, one contender, took the vacant chief executive job at Merrill Lynch, another firm that is reeling from subprime mortgage exposure. (See: “Merrill Hires Mr. Fix-It”) Another possibility is Robert Willumstad, the chairman of American International Group, who left Citi two years ago after being passed over for the top job at the bank.

"This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business," acting chief executive Win Bischoff said in a statement Monday night.

“It builds on a series of actions we have taken over the past several months to strengthen our capital base, which have included sales of certain non-strategic assets, the issuance of trust preferred securities, and the previously announced plan to use common stock to purchase 32% of Nikko Cordial in Japan,” he added.

The deal is the third big investment in a multinational made in recent weeks by the oil-rich sheikdoms of the United Arab Emirates. An investment vehicle of the ruler of Dubai announced earlier Monday that it was buying a stake in Sony that was also believed to be under 5%, and a state-run Abu Dhabi fund struck a deal Nov. 16 to take an 8.1% stake in AMD.

Apart from the mortgage securities exposure, one of Citi’s biggest problems in the last few years has been holding down expenses, which have outpaced revenue growth for several quarters. Citi cut 17,000 jobs earlier this year and said it was going to embark on a major cost control initiative. There were reports Monday that many thousands more jobs would be cut in the wake of its current problems.

A Citi spokesman wouldn’t put a number to the cuts, but acknowledged, “We are engaged in a planning process in anticipation of our new CEO and our business heads are planning ways in which we can be more efficient and cost effective to position our businesses in line with economic realities.”

Analysts, notably CIBC World Markets’ Meredith Whitney, have warned that the company’s declining capital levels mean it either needs to sell assets or cut its dividend to shore up capital. At the end of September, Citi’s main capital level, called Tier 1, was 7.3%, below the company’s 7.5% target, but above the regulatory red line of 4%.

The investment by Abu Dhabi will apply to Tier 1 capital. "This investment also enables us to access capital in an efficient manner, and is consistent with our strategy of maintaining a balance sheet that benefits from highly diverse sources of funding in terms of both geography and type of security," Bischoff said in the statement.

Now all they need is a permanent chief executive.

Very interesting. They are buying the banks with the petrodollars, and the "sand niggers" as some would call them might save this whole fkng mess in the US. Isn't this quite ironic? At the same time, China sitting on top of 1.4 trillion US has the button ready to flood the world with dollars.

But I wonder what a stake on Citi, given their political orientation, might cause.

I think either this whole thing will implode OR, rescued by the petrodollars a new, clean, fresh slate will become a possibility OR, in a weirder scenario, the credit crunch + petro dollars rescue might lead to concessions in Israel...long shot though.

Funny. AMD, the microprocessors people, sold some 7% of its stock to another fund from the Middle East...

Interesting that instead of blasting their money on Mercedes and corporate jets they are wisely cherry picking and buying 20+ years more of caliphate to the region.

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sanjj

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Posted: Nov 28, 2007 - 03:29 AM

Heard the news.

Timing is really suspicious.

bougie
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Posted: Nov 28, 2007 - 06:12 AM

Well Dubai has bought 1B in DaimlerCrysler, 7.5B in a bank seems a better ROI

Last edited by bougie on Nov 28, 2007 - 06:18 AM; edited 2 times in total

bougie
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Posted: Nov 28, 2007 - 06:13 AM

^ refer to above

CoffeeHawk_0
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Joined: July 14, 2005
Posts: 14444

Posted: Nov 28, 2007 - 06:40 AM

+ 5 billion USD to build a new refinery for Pakistan

bougie
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Joined: Nov 20, 2004
Posts: 13323
Location: Wuhan Hubei China

Posted: Nov 28, 2007 - 06:42 AM

You mean it will be to refine Pakistinians ?

CoffeeHawk_0
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Joined: July 14, 2005
Posts: 14444

Posted: Nov 28, 2007 - 07:26 AM

is your middle name Adolph?

sanjj

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Posted: Nov 28, 2007 - 07:45 AM

haha

anxious to see his comeback

p1atl10

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Posted: Nov 28, 2007 - 08:01 AM

Quote:

Interesting that instead of blasting their money on Mercedes and corporate jets they are wisely cherry picking and buying 20+ years more of caliphate to the region.

I think it is a bit of both...One of the Princes just ordered an Aibus A380 as a private jet. Estimated cost of $450 million...before running costs.

But...I agree with your point. They are looking to the future when the oil runs dry.
But they have enough wealth at present to do both.

My bet on the Peace Conference?....no outcome of any substantial nature.

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