Tuesday, January 15th, 2008
Citigroup Courts Foreign Investment As Another Round of Writedowns Looms
By Jennifer Yousfi
Managing Editor
Despite all of its troubles to date, Citigroup Inc. (C) still needs to write off an additional $24 billion in subprime and credit-related losses. That has forced the battered bank to turn to foreign investors for yet another capital infusion.
Citigroup will be announcing its fourth-quarter earnings, sure to be a loss, later today (Tuesday) and may have to layoff 20,000 employees. But the bank also hopes to announce additional cash investments valued at between $8 and $15 billion, according to various media reports including The Wall Street Journal and Financial Times.
Saudi Arabian Prince Alwaleed bin Talal, who already owns a 4% stake in Citigroup, is likely to invest another large sum. Alwaleed famously bailed out Citigroup’s predecessor, Citicorp, with a $590 million investment in 1991. That initial investment is now valued at approximately $6 billion.
Another $2 billion is expected to come from China Development Bank. However, reports citing sources close to the deal have surfaced, stating the Chinese government might have plans to block the deal, which could involve the purchase of equity, debt, or a combination of both.
An additional suspected player in the deal is Kuwait Investment Authority. The state-directed sovereign wealth fund may invest as much as $3 billion.
Kuwait is also rumored to be looking at Merrill Lynch & Co. Inc. (MER) as a recipient of a $4 billion investment. Merrill is scheduled to announce earnings on Thursday and is expected to take another $15 billion in write-downs.
Citigroup already received a $7.5 billion investment from Abu Dhabi Investment Authority in November, while Merrill received a combined $6.2 billion investment from Singapore sovereign wealth fund, Temasek Holdings Ptd. Ltd., and private equity firm, Davis Selected Advisors LP in December.
News and Related Story Links:
- Bloomberg:
Citigroup May Turn to Alwaleed, China for Cash to Offset Losses - MarketWatch:
Citigroup write-offs could reach $24 billion - Reuters:
Citigroup stake sale may meet China opposition - MoneyMorning:
Citigroup: Why This Turnaround Play Has Legs - Big Ones
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