Citigroup is cash strapped. To raise cash it has agreed to sell $12 billion worth of leveraged loans it was holding at a reported 90 cents on the dollar. Earlier today in Less Than Meets The Eye at Citigroup, Goldman I noted that in order for Citigroup to get a price of $12 billion for the loan portfolio it sold, it had to agree to indemnify the buyers of the first 20% of losses. Tonight more details are emerging.
Reuters is reporting Citi financing its $12 bln sale of loans.
Citigroup Inc's (C) plan to sell $12 billion of loans and bonds made to private equity firms is seen as a positive for the bank and the loan market, but the deal will leave the largest U.S. bank with exposure to those private equity firms even after the sale.
That's because Citi is financing much of the sale itself, according to a person familiar with the deal. It is lending some money to the private equity firms, which will combine it with some of their own money to purchase the debt.
Essentially, Citigroup is re-lending money, but on different terms. The new loans are obligations of the private equity firms, and Citi is selling the original loans to the firms at somewhere around 90 cents on the dollar.
After the sale, Citi would no longer have to mark down the original leveraged loans if their value falls further, a real possibility in the currently disrupted credit markets. It also allows the bank to confirm the recorded values of other leveraged loans in its portfolio.
http://globaleconomicanalysis.blogspot.com/2008/04/ponzi-financing-at-citigroup.html
Ponzi Financing ? Not the first time investmentbanks using Ponzi schemes, or ?
Reuters is reporting Citi financing its $12 bln sale of loans.
Citigroup Inc's (C) plan to sell $12 billion of loans and bonds made to private equity firms is seen as a positive for the bank and the loan market, but the deal will leave the largest U.S. bank with exposure to those private equity firms even after the sale.
That's because Citi is financing much of the sale itself, according to a person familiar with the deal. It is lending some money to the private equity firms, which will combine it with some of their own money to purchase the debt.
Essentially, Citigroup is re-lending money, but on different terms. The new loans are obligations of the private equity firms, and Citi is selling the original loans to the firms at somewhere around 90 cents on the dollar.
After the sale, Citi would no longer have to mark down the original leveraged loans if their value falls further, a real possibility in the currently disrupted credit markets. It also allows the bank to confirm the recorded values of other leveraged loans in its portfolio.
http://globaleconomicanalysis.blogspot.com/2008/04/ponzi-financing-at-citigroup.html
Ponzi Financing ? Not the first time investmentbanks using Ponzi schemes, or ?
