Citigroup said that the Abu Dhabi Investment Authority will invest US$7.5 billion in the largest US bank, offering needed capital to offset big losses from mortgages and other investments.
The cash from the sovereign investment fund of the Gulf Arab state, which has been a beneficiary of this year's surge in oil prices, will be convertible into no more than 4.9 percent of Citigroup Inc's equity. Citigroup characterized the investment as passive and said the fund will not be able to name any board members to the bank.
The Investment Authority would become one of Citi's largest shareholders.
The Abu Dhabi investment, which was expected to close within the next several days, will be considered Tier 1 capital for regulatory purposes, helping Citi reach its goal of returning to its target capital ratios in the first half of next year, the bank said late on Monday.
Citigroup's shares have lost about 45 percent of their value since the beginning of this year, wiping away US$124 billion in market capitalization, as the drumbeat of bad news about its investment losses has mounted.
"We see in Citi a highly respected company with a premier brand and with tremendous opportunities for growth," Investment Authority managing director Sheikh Ahmed Bin Zayed al Nahayan said.
"This investment reflects our confidence in Citi's potential to build shareholder value." Charles Prince stepped down as Citigroup chairman and chief executive on Nov. 4, the same day Citi announced it would likely write down the value of its portfolio by US$8 billion to US$11 billion in the fourth quarter.
In the third quarter, the bank's exposure to assets tied to subprime mortgages led to a loss of about US$6.5 billion.
The Investment Authority will receive equity units that pay an 11 percent annual yield until they are converted into Citigroup common shares at a price of up to US$37.24 a share between March 15, 2010, and Sept. 15, 2011.
The investment is the latest by sovereign funds in the Middle East that have been building up their overseas investments recently, many of them on the back of oil prices that have risen more than 60 percent this year and have brought the region record cash flows.
Dubai International Capital, which is owned by the ruler of that booming Persian Gulf city-state, said earlier on Monday it had acquired a stake of undisclosed size in the Japanese electronics and media company Sony Corp.
Its other investments this year included acquiring a 3.12 percent stake in European Aeronautic Defence & Space Co, which builds Airbus commercial planes and military aircraft. The firm also holds stakes in Daimler AG and British bank HSBC Holdings PLC.
Many companies have welcomed such investments because the funds tend to be stable investors, but some US officials have expressed concern that their acquisitions could target sensitive industries with links to national security.
Abu Dhabi's move recalls the early 1990s investment in Citi made by Saudi Prince Alwaleed bin Talal.
After Citi made some losing bets on US real estate and Latin America, Alwaleed bought a stake in the bank for less than US$600 million that has since ballooned into several billions of dollars.
The Abu Dhabi investment, which was expected to close within the next several days, came at a time when Citi is trying to reassure investors amid heavy credit-related losses and its search for a new CEO.
"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.
Citi shares fell US$1, or 3.2 percent, to close at US$30.70 on Monday after hitting a five-year low earlier in the day.
"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.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique