Nov 27, 2007

CitiGroup Puts Our Oil Money To Work

Yesterday CitiGroup announced the Abu Dhabi Investment Authority will invest $7.5 billion in our nation's largest bank. The investment was made through the purchase of convertible bonds that pay 11% and will convert to common shares, at a maximum price of $37.42, anytime during the fourth year of the note.

Citi must need that money fast because under the above terms an 11% convertible (2% over junk bonds) would have been grabbed up by US investors. Then again there is the possibility of doing significant business with the sovereign investment trust in the future. With Citi pointing the way, many more opportunities should open up for the group.

Still, if CitiGroup’s stock regains half of its value, then these convertibles are extremely valuable and I would rather see Americans rewarded for their years of investment into CitiGroup.
If the company announces layoffs of in the 40,000 neighborhood, then their stock should take a good jump on the strong cost cutting news. There is also a consensus that CitiGroup would release significant value to shareholders if the company were broken up.

Joseph Altman, AP Business Writer wrote an interesting article: Citi Sells Stake to Abu Dhabi Fund