Citigroup is turning to cash-rich foreign investors for a second time as it confronts mounting losses on mortgage-related investments.
The financial giant is in talks to sell a large stake to a Chinese bank and several other investors, including foreign governments, in a deal that could raise US$10 billion, people briefed on the plan said on Friday.
The China Development Bank (
Citigroup is also in talks with the Government of Singapore Investment Corp and the Kuwait Investment Authority.
Large investors like Prince Walid bin Talal of Saudi Arabia, who helped rescue Citigroup in the early 1990s, and Capital Research and Management, a money management firm that is the bank's biggest shareholder, are being offered the chance to invest as well as to avoid having their current stakes diluted, but it is unclear if they will choose to do so. Other investors may also be involved.
While the deals may yet fall through, announcements are expected within days.
The talks come as Citigroup is expected to disclose additional huge losses stemming from bad mortgage-related investments. Analysts project the company is likely to announce charges of US$12 billion to US$18 billion when it reports earnings on Tuesday.
If the deal goes through, it would be the second instance in less than two months of Citigroup's being forced to turn to foreign investors to shore up its weakening finances.
In November, the company sold a US$7.5 billion stake to a Middle Eastern fund, Abu Dhabi Investment Authority, underscoring its deteriorating capital position. That purchase gave Abu Dhabi a 5 percent stake.
The latest developments represent a crucial step for Vikram S. Pandit, who was named chief executive in December. Pandit has moved quickly to shore up Citigroup and place his stamp on the company after succeeding Charles O. Prince III, who abruptly resigned in early November.
Pandit has been personally involved in the talks. He and other Citigroup executives have been working on the transaction for several weeks, and several high-ranking members of his team returned from Asia in the last few days.
Citigroup spokeswoman Shannon Bell declined to comment.
The investment underscores Citigroup's precarious capital position and highlights the growing wealth of foreign investors that are buying up assets and taking stakes in numerous US companies.
The company's struggles raise serious questions about its diversified business model and risk-management practices during one of the most turbulent times in its history.
Pandit has already replaced several senior executives with his own lieutenants and reorganized Citigroup's mortgage business. Just this week, he appointed new leaders to oversee the company's restructuring effort and help steer the strategy of its investment bank.
A shake-up in the company's consumer lending business may be on the way.
Citigroup is also bracing itself for another big round of layoffs. The company eliminated about 17,000 jobs last spring.
There is growing consensus on Wall Street, meanwhile, that the board may sharply cut the company's stock dividend, a move that might save it US$5 billion a year. Several analysts have been calling on the company to do so since last fall.
Other financial institutions have sought cash, too. Singapore's lesser-known government fund invested US$9.7 billion in UBS; and the China Investment Corp poured US$5 billion into Morgan Stanley.
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