Abu Dhabi to the Rescue! (of Citigroup)

Citigroup to sell $7.5 billion stake to Abu Dhabi

By Dan Wilchins and James Cordahi

NEW YORK/DUBAI (Reuters) - Citigroup Inc (C.N) is selling up to 4.9 percent of itself for $7.5 billion to the Gulf Arab emirate of Abu Dhabi, giving the largest U.S. bank fresh capital as it wrestles with the subprime mortgage crisis and the resignation of its chief executive.

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Citi is paying a high price for the capital injection by selling mandatory convertible securities to Abu Dhabi which pay a fixed coupon of 11 percent. That is above the average yield on U.S. junk bonds, which is 9.4 percent according to Merrill Lynch data.

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U.S. Senator Charles Schumer, who opposed Dubai Ports World's plan to purchase assets at six U.S. ports and raised questions about Borse Dubai's plans to swap stakes with Nasdaq (NDAQ.O), said the Citi transaction will bolster the bank's competitiveness and "help preserve New York's status as the world's financial center."

Abu Dhabi's stake now ranks larger than that of Saudi Prince Alwaleed bin Talal, who is one of Citi's largest shareholders.

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The Abu Dhabi Investment Authority will have no special rights of ownership or control over Citi and no role in the management or governance of the bank, including no right to name board members.

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Abu Dhabi to the Rescue!

Late last night, the Citigroup will receive a $7.5B cash infusion from the governmental investment arm of Abu Dhabi (ADIA). Recall that in 1992 -- the last credit cycle problem, and much deeper recession than 2001 -- it was Saudi Prince Alwaleed who rescued Citi by provided funding.

If you thought Citigroup was not in deep trouble, than check out the terms of the deal:

• The investment authority known as ADIA will become one of Citigroup's largest shareholders, with a stake of no more than 4.9%.

• ADIA will receive convertible stock in Citigroup yielding 11% annually.

• Shares are required to be converted into common stock at a conversion price of between $31.83 and $37.24 a share over a period of time between March 2010 and September 2011.

• The stake will exceed that of Saudi Prince Alwaleed bin Talal, long known as one of Citigroup's largest shareholders.

11-frickin-percent!

How's this for ironic: Citibank has essentially become a sub-prime borrower -- only without the advantages of teaser rates!

Here's the best part of all: Futures skyrocketed on the news, and as I am typing this, the Dow is indicating a plus 120 points for the open. Yeah! Rescue plan! Things are so awful, we are going to get a Fed cut -- Whooppee!

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Citigroup planning 'large' job cuts: report

Mon Nov 26, 3:21 PM ET

NEW YORK (AFP) - Citigroup, America's second biggest banking group by market worth, is planning "large" job cuts just seven months after it announced a mass layoff of 17,000 employees, a media report said Monday.

The CNBC business television channel said Citigroup, which has seen its finances stretched by multibillion dollar writeoffs largely tied to mortgage investments, was preparing a second round of big layoffs.

Citing people with knowledge of the matter, CNBC said the total number of employees affected could be as high as 45,000. Citigroup currently employs 275,000 staff, according to its website.

A Citigroup spokesman said the bank was assessing ways to cut costs.

"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. Any reports on specific numbers are not factual," the Citigroup spokesman told AFP.

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