Abu Dhabi Investment Authority (ADIA), the institutional investment arm of the UAE emirate of the same name, executed a $7.5 billion capital infusion into Citigroup, the Journal reports.
The terms of the deal reveal the depths of Citigroup's, and by proxy the whole Street's, trouble:
- "ADIA will become one of Citigroup's largest shareholders, with a stake of no more than 4.9%," which will "exceed that of Saudi Prince Alwaleed bin Talal, long known as one of Citigroup's largest shareholders."
- "The shares are required to be converted into common stock at a conversion price of between $31.83 and $37.24 a share over a period of time between March 2010 and September 2011."
- The kicker: "ADIA will receive convertible stock in Citigroup yielding 11% annually."
Eleven percent! Absolutely insane, and the irony is rich: With that rate, Citigroup itself has become a sub-prime borrower! That yield is well above the current rate for Citi paper (about 9%), and more generous still given that the bonds are convertible at a price premium only 1% above yesterday's five-year-low close.
Even more absurd, the markets are opening with a strong positive bias, with the DJI up almost a hundred points.
Write these numbers down, next to today's date: 12,743, 2,540, 1,407
