Kuwait's sovereign wealth fund sells Citigroup stake, banks $1.1 billion in profit

[Newsjock]

Source: Associated Press

DUBAI, United Arab Emirates (AP) -- Kuwait's sovereign wealth fund said Sunday it booked a profit of $1.1 billion by selling the stake it took in Citigroup Inc. less than two years ago when the banking giant was strapped for cash.

The Kuwait Investment Authority said in a statement it sold the preferred shares after converting them to common stock for $4.1 billion. That works out to a gain of nearly 37 percent on its $3 billion investment.

... The Kuwait fund's move came as a surprise. In September, it said it had no intention of selling its holdings in either Citi or Bank of America in the short term because its investment policies are based "on a long-term vision."

Kuwait took its stake in Citi last year after another Gulf fund, the Abu Dhabi Investment Authority, paid $7.5 billion for a 4.9 percent stake in the company. ADIA's holdings, known as "equity units," will begin to convert into ordinary shares starting in March next year.

Read more: http://finance.yahoo.com/news/Kuwait-sells-Citigroup-stake-apf-4027132675.html?x=0&sec=topStories&pos=4&asset=&ccode=

[daninthemoon]

1. Thank you once again to both President Bushes.

[galileoreloaded]

2. The got a "ratchet" when they bought so there was no real reason to do this now...

shit, looks like I better short Citi...

[aquart]

3. Kuwait dumped Citi?

Oh, why?

[Ghost Dog]

4. Good timing, huh? Alert City of London management.

[JCMach1]

5. Back story on this is that ADIA (Abu Dhabi) is converting its bonds

for stock @ $31 a share (CITI currently hovers around $4).

Could it be that CITI was threatening to default on the bonds? Is Kuwait making this decision based on insider knowledge? You be the judge...


...The Abu Dhabi Investment Authority (ADIA), the country’s largest sovereign wealth fund, is to convert bonds it holds in Citigroup into shares at more than seven times their current value.

The deal, which will come in four stages beginning in March, is the result of a two-year-old agreement between ADIA and Citi that was designed to inject new capital into the US bank, which was then facing liquidity problems.

Under the original agreement, ADIA would have been left with a 4.9 per cent shareholding in Citi, but this has since been diluted by the US government, which took a 36 per cent share in the bank earlier this year, and other investors.

When the deal is completed, ADIA will also have received nearly US$3 billion (Dh11.01bn) from the special dividend Citi agreed to pay in 2007 in return for its original $7.5bn investment. ADIA will receive the last of its shares in September 2011.

ADIA declined to comment yesterday, but a banker based in Dubai who declined to be named said: “It looked a good deal at the time but markets moved against them . Who knows, they might move back in their favour.”

At the time of the deal, Citi was coming under pressure on global financial markets because of perceived weakness in its levels of capital adequacy.

ADIA agreed to inject $7.5bn into the bank through a convertible bond paying an 11 per cent dividend, significantly above money market rates at the time, but with a commitment to convert the bond at $31.83 a share. Citi shares closed at $4.06 on Friday.... http://www.thenational.ae/apps/pbcs.dll/article?AID=/20091206/BUSINESS/712059934/1005

[aquart]

6. My guess is that the criminal enterprise that is Citi can't pay.