Tuesday, April 8, 2008

Bottom feeding

This item appeared in Bloomberg News; it's worth printing the entire, short item here.

Citigroup Selling $12 Billion of Loans to Buyout Firms, FT Says

April 8 (Bloomberg) -- Citigroup Inc. is in talks to sell $12 billion of leveraged loans to Apollo Management LP, Blackstone Group LP and TPG Inc., the Financial Times said, citing unidentified people familiar with the matter.

The loans include debt used to finance acquisitions by the three private equity firms and their rivals, the Financial Times reported on its Web site. The buyers would purchase the loans at a discount of about 90 cents on the dollar, the newspaper reported. The sale would advance Citigroup Chief Executive Officer Vikram Pandit's plan to reduce the bank's balance sheet.

Apollo would buy about half the portfolio, with the rest going to Blackstone and TPG, the newspaper said. Citigroup may disclose the sale next week at about the same time that it posts first-quarter financial results, the Financial Times reported.

That would allow Citi to clean up its balance sheet a bit (12 billion is a bit for that behemoth), and would give the three buyers a 10% discount on par value of the loans. Clearly, the three expect that, in time, they will get 100% of par, or at least more than 90% -- or else, why buy? The three firms can take a longer-term view than Citi, which is getting pummeled.

The wording of the news item shows how careless some of these financial websites can be with their English: reduce the bank's balance sheet? No, clean it up by reducing its exposure

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