NEW YORK, 13 January 2008 — Saudi Arabian Prince Alwaleed bin Talal, Citigroup’s largest individual shareholder, will inject new cash to help America’s biggest bank grapple with heavy mortgage market losses, the Wall Street Journal reported on its website on Friday.
Alwaleed is expected to invest about $2 billion (1.3 billion euros) in Citigroup Inc., one person said, according to the Journal.
Alwaleed, who has owned his Citi stake since the early 1990s and helped engineer a previous rescue plan for the bank more than a dozen years ago, is likely to keep his total stake in the bank below 5 percent to avoid regulatory scrutiny, the newspaper said.
Citigroup is putting the final touches to a second big fundraising, seeking up to $14 billion from Chinese, Kuwaiti and public market investors, according to yesterday’s Financial Times.
The FT cited people familiar with the negotiations as saying about $9 billion would probably come from investors in China.
The Kuwait Investment Authority would contribute about $1 billion and $2 billion to $4 billion would be raised through a public placement of shares, it said.
The FT said the formula of the latest fundraising was still being adjusted and it was possible other investors could participate.
In addition, the China Development Bank is expected to invest $2 billion in Citigroup, the newspaper reported, adding other investors could inject additional capital. China Development Bank, which was established in 1994 and is now preparing to become a commercial lender, got a $20 billion (13.5 billion euros) injection Dec. 31 from China’s sovereign wealth fund, China Investment Corp.
In recent months, China Investment Corp. said it is investing $5 billion (3.4 billion euros) in Morgan Stanley; Singapore’s state-run Temasek Holdings invested $4.4 billion (2.9 billion euros) in Merrill Lynch; and China’s government-controlled Citic Securities Co. and US investment bank Bear Stearns Cos agreed to invest $1 billion (680,000 euros) in each other for minority stakes that could be expanded.
Altogether, the bank is hoping to raise $8 billion to $10 billion from a number of investors, including the Chinese bank and Alwaleed, the newspaper said.
In November, Citi accepted $7.5 billion in new capital from the The Abu Dhabi Investment Authority only weeks after its former chief executive officer, Charles Prince, was forced out amid news of the heavy losses related to bad bets on mortgage securities and an ailing housing markets.
Asian funds have been buying up the pummeled shares of US banks in need of capital. The deals not only dilute the value of the stock, but also worry some investors who are wary about foreign ownership of US companies.
Citigroup spokeswoman Shannon Bell declined to comment.
