Reuters
Abu Dhabi reviewing Citigroup investment: sources
By Stanley Carvalho
Sun Mar 1, 2009 8:52am EST
ABU DHABI (Reuters) - Abu Dhabi is assessing its $7.5 billion investment in Citigroup as the bank's problems deepen and consequences of a possible nationalization become clearer, according to sources close to the Abu Dhabi Investment Authority (ADIA).
Abu Dhabi is the wealthiest of seven emirates within the United Arab Emirates, the world's fifth-largest petroleum exporter.
ADIA invested $7.5 billon last year in Citi through convertible bonds that pay 11 percent in interest, but it must start converting the bonds into 235.6 million shares in Citigroup from March next year.
"Nothing has changed from ADIA's perspective at this point. ADIA's convertible bonds are due for conversion in a phased manner between March 2010 and September 2011, and that stands," an Abu Dhabi government official told Reuters.
"But it is carefully assessing its options due to the latest events -- although no decision is taken yet," he said, declining to be named.
In the original deal with ADIA, the Citi securities MUST BE CONVERTED into common stock at a PRICE between $31.83 and $37.24 a share between March 2010 and September 2011. Citi last traded at $1.50 a share. [This is the ONLY reason Citi is kept alive!]
Options for the investment include holding them through to the conversion, which may allow enough time for the share price to recover, or converting them early, in a move that may head off the possibility of the U.S. government nationalizing it.
"We know ADIA is following the recent developments closely, but as a bondholder, ADIA's investments are secure because the U.S. government has left bond holders untouched, unlike other investors such as preferred shareholders," a senior Abu Dhabi-based banker close to ADIA said.
On Friday, the U.S. government announced it would convert up to $25 billion of its $45 billion worth of preferred stock into common equity at $3.25 per share. Citi last traded at $1.50 a share. [Considered JUNK in the financial world! Also please note that our government has invested our taxpayer money for an INSTANT LOSS!!!]
Other preferred shareholders, including the Government of Singapore Investment Corporation and Saudi Arabia's Prince Alwaleed, will convert up to $27.5 billion of their holdings at the same price.
Gulf sovereign funds have been badly burned buying into troubled U.S. banks, with the Kuwait Investment Authority investing last year in U.S. banks Citigroup and Merrill Lynch before both stocks dived and the latter was sold for a fraction of its earlier price to Bank of America.
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