It's news when Arabs buy stakes in banks. Not Jews running them, though!
"Citigroup will pay 11% on $7.5b infusion" by Associated Press November 28, 2007
NEW YORK - Abu Dhabi's $7.5 billion stake in Citigroup Inc. is more than just a bandage for the bank, but it's far from a cure.
Citi is struggling with a stock that is bouncing off of a five-year low, billions in credit losses, and a lack of leadership at one of the most critical times in its history.
Whoever the board chooses as chief executive has a tough task ahead. The 11 percent yield Citi is paying the Gulf state for its investment shows that raising cash comes at a price, and the lukewarm reaction by shareholders illustrates that no single strategy is going to please everyone.
At this point, even without a permanent leader at its helm, the bank is looking into more ways to draw capital.
"We are actively working on other sources, like sales of nonstrategic assets," a senior Citigroup executive said. Under the ground rules of the interview, Citigroup requested the official not be named.
The executive gave the example of the sale during the third quarter of a 7 percent stake in one of its businesses in Brazil. "There are a number of things like that that we are evaluating constantly," he said.
And it's possible that another investor such as Abu Dhabi could come along.
"We had many inquiries from different potential investors," the senior executive said. But the executive would not say whether any of those deals are still in the works, and said the type of security Abu Dhabi bought has a limit that Citi is nearing.
In general, Wall Street was relieved to hear about the Abu Dhabi Investment Company's infusion, which will boost Citi's ratio of cash to debt and, in turn, make Citi stronger financially. Once the equity units Abu Dhabi bought are converted into stock in 2010 and 2011, Abu Dhabi will hold a 4.9 percent stake in Citi. Until those units get converted, Citi will pay Abu Dhabi a yield, or essentially an interest rate, of 11 percent."
"Abu Dhabi deal highlights power of sovereign funds" by Associated Press November 28, 2007
CAIRO - The decision by the world's largest sovereign wealth fund to invest billions in struggling Citigroup has highlighted the growing economic power of Arab Gulf states, awash with money because of high oil prices.
US officials have voiced concerns about such funds' secrecy in the past. But the injection of money by the Abu Dhabi Investment Authority could help stabilize Citigroup Inc., the United States' largest bank, as it struggles with billions in losses from America's mortgage crisis.
The tension illustrates the broader dilemma the United States faces in deciding how to deal with such sovereign funds: It relies on their capital inflows to bolster the US economy, but some officials worry that foreign ownership of key US companies could jeopardize national security.
Analysts said Abu Dhabi's minority investment appeared to be structured to produce the least possible backlash from politicians concerned about its strategic implications.
The issue is likely to grow: Merrill Lynch estimates the total assets managed by sovereign funds already may exceed $2 trillion - more than all the world's hedge funds combined - and could grow to $7.9 trillion by 2011.
The bank estimates the assets of the Abu Dhabi Investment Authority - a secretive government fund composed of the emirate's oil revenues and ultimately controlled by the city-state's ruler - alone could total $875 billion.
Washington has relied on the oil-rich Gulf countries, and China, to fund its growing budget deficits by buying vast amounts of US Treasury securities, propping up the value of the ailing dollar.
Record oil prices, which have risen more than 60 percent this year, have swelled the coffers of Gulf countries like the United Arab Emirates.
That has prompted them to look for other financial opportunities, like Abu Dhabi's planned $7.5 billion investment in Citigroup revealed late Monday.
Morgan Stanley estimates the funds have spent $35 billion since the start of last year on stakes in financial organizations, with $26 billion coming in roughly the last six months.
Kenneth Rogoff, a Harvard University economics professor, said the latest investment in Citigroup could help improve the funds' image over time.
"The [Abu Dhabi] fund has a very professional reputation and will probably be a good shareholder and will cast sovereign funds in a good light. But that won't happen overnight," he said.
Rogoff also warned that some people might view Abu Dhabi as buying Citigroup at a "fire sale price."
"For Abu Dhabi and Citi, Credit Crisis Drove Deal" by HEATHER TIMMONS and JULIA WERDIGIER
A falling dollar, a growing pile of oil revenue and an interest in not being overshadowed by neighboring Dubai’s increasingly high profile spurred Abu Dhabi to break with its low-key investing tradition to purchase a big $7.5 billion stake in Citigroup.
That is the view of analysts, economists and deal makers who keep an eye on the secretive Abu Dhabi Investment Authority, the largest sovereign wealth fund in the world, with assets estimated at $650 billion. Despite its size, Abu Dhabi’s royal family has been largely content to pour money into low-return, low-profile investments — until now.
But Abu Dhabi, the largest oil producer of the seven city-states that compose the United Arab Emirates, is worried enough about the eroding value of its pile of petrodollars that it appears ready to pursue more big-ticket deals.
With the dollar shrinking, “they’re watching them depreciate and that’s driving their anxiety,” said Marc Ginsberg, former United States ambassador to Morocco, who has worked with companies in other emirates.
Citigroup’s motivations were just as great. The company’s shares have dropped sharply since October, when billions of dollars in write-downs first started to mount. Later, Citi took another $8 billion to $11 billion charge related to bad subprime mortgage investments, which could wipe out its fourth-quarter profit. As a result, it offered Abu Dhabi generous terms to get its money.
Both sides were driven together by the credit crisis that struck the American economy with such force this summer. Abu Dhabi, like other oil producers, has an interest in making sure the United States economy does not weaken further, said Mr. Ginsberg.
And ever since Charles O. Prince III resigned as chairman and chief executive last month, and while Citi’s board has searched for a new leader, analysts and investors have renewed calls to dismantle the company.
Sources close to the deal, who did not want to be quoted because they were not authorized to comment, said Abu Dhabi, a longtime Citi client, had been looking to make a play in financial services to take advantage of market dislocation. They said the emirate had considered buying mortgages or distressed loans.
But in recent weeks, it decided to invest directly in financial institutions. The Abu Dhabi fund’s original plan was to buy small stakes, say $1 billion or so, in five or six different firms. But it zeroed in on the idea of making a big investment in Citigroup, those close to the deal say, after Mr. Prince was ousted.
Through its relationships with Citi in the Middle East — Citi has 14 offices and 4,000 employees in the region — Abu Dhabi reached out about making a deal. The point person for Citi was Michael S. Klein, the co-head of Citigroup’s investment bank, who had spent time in the Persian Gulf region when he ran Citigroup’s Europe, Middle East and Africa operations. The negotiations took place in large part over the telephone and in video conferences before Mr. Klein and later Robert E. Rubin, the new chairman of Citigroup and a former Treasury secretary, boarded a plane to the Gulf to complete the deal.
Abu Dhabi’s 4.9 percent stake means that nearly 10 percent of Citigroup will be controlled by Middle Eastern investors. Prince Walid bin Talal of Saudi Arabia already owns a stake of roughly 5 percent after bailing out the company in the early 1990s.
Given sensitivity to past Arab investments, particularly last year’s aborted sale of some American ports to a Dubai firm, Citigroup officials alerted Congressional leaders in Washington before announcing the deal with the sovereign fund.
“I spoke to them at some length about it the day before,” said Senator Charles E. Schumer of New York, chairman of the Joint Economic Committee and a senior member of the Senate Banking and Finance Committees, referring to senior Citigroup officials.
“It seemed to me that this is good for Citigroup, it’s good for jobs in New York. It bolsters their capital position, allows what is fundamentally a very strong company to weather a difficult time,” said Mr. Schumer.
He contrasted the sovereign fund’s deal with Citi to the aborted Dubai ports deal. “My worries relate when there is a very strong security interest as in the ports deal or if they are buying an entity that is not purely an economic one,” he said.
Abu Dhabi has given assurances in other deals that their investments are driven only by economic considerations, not political ones. “They have made those assurances and have lived up to them in the past,” Mr. Schumer added.
In a complex transaction that has been blessed by federal regulators, the Abu Dhabi fund will have no role in the management or governance of Citigroup, nor any presence on its board.
“I think this is a terrific deal for Citi and the global market place as a whole,” said Sanford I. Weill, Mr. Prince’s predecessor and mentor. “One has to be impressed with how quickly the new leadership team put this together.”
But Abu Dhabi’s ruling family, headed by Sheik Khalifa bin Zayed al-Nahyan, will own the largest individual stake in Citigroup when the deal closes, edging out Prince Walid of Saudia Arabia.
The sovereign fund, started in 1976, has nearly double the assets of the next largest, Norway’s government pension fund, according to Standard Chartered, a British bank.
Bankers in the Middle East said the sovereign fund had traditionally funneled more than three-quarters of its cash into other big global investment funds, and eschewed large individual company deals. Investing through other funds has allowed the Abu Dhabi fund to maintain a low profile and to track money flows around the world that could make future big investments like the Citi deal easier.
Sheik Khalifa is also the fund’s chairman and president of the U.A.E., which was ruled by his father, Sheik Zayed bin Sultan al-Nahyan, for nearly 40 years until his death in 2004. Sheik Zayed was largely credited with helping transform the U.A.E. from a collective of nomadic Bedouin tribesmen to an oil-rich nation with a high literacy rate.
While Abu Dhabi contains about 94 percent of the oil reserves in the U.A.E. and includes about 87 percent of the country’s land mass, the city-state’s international profile has paled in recent years in contrast to that of its neighbor, Dubai.
Thanks to a series of big-name deals and an audacious growth strategy, Dubai is becoming a tourism destination, a regional financial center and a favored buyer of marquee assets. On Monday, Dubai International Capital said it had bought a substantial stake in the Sony Corporation.
“They are different animals,” said David Butter, the Middle East regional head at the Economist Intelligence Unit, comparing Dubai’s growth strategy with Abu Dhabi’s. “The purpose of A.D.I.A. is to invest surplus cash in assets that would provide steady gain and returns over time,” he said, while Dubai, with less oil reserves, has had to create its own sources of wealth.
Recently, though, Abu Dhabi has “generally been changing its approach” to investments, said Mr. Butter. With the creation of a new investment arm, Mubadala Development, in October of 2002, Abu Dhabi started to invest directly in projects like Nigerian telecommunications and power plants in Algeria.
With the Citigroup deal, the Abu Dhabi fund has purchased part of one of the world’s biggest banking franchises for a bargain price. A Punk, Ziegel & Company analyst, Richard Bove, raised his rating on the bank yesterday to buy, from market perform, saying the dividend was safe and the franchise was strong.
Citigroup’s stock closed at $30.32, up 52 cents yesterday, the day after the announcement of the sovereign fund’s stake.
Like other sovereign wealth funds, the Abu Dhabi fund is looking for investments to help diversify foreign currency reserves earned from exporting oil.
Its shift in investment strategy is not immediately being accompanied by an increase in public transparency. Several calls to the company’s headquarters in Abu Dhabi went unreturned."
Gee, the Arabs buy something and they get a microscope up their ass from AmeriKa's MSM!
But the Zionists can control the banks and the media, and no questions asked!
Matter of fact, they can spy on America, and no problem!
Israeli Spying: The Mother of all Scandals
And as if the bank deal wasn't enough, the NYT placed this garbage on its front-page!
Oil Producers See the World and Buy It Up
Case closed, readers!
