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May 25, 2010 11:04 pm
The Qatar Investment Authority, a sovereign wealth fund, has expressed interest in buying part of the US Treasury’s stake in Citigroup, potentially boosting efforts to sell the shares amid the global rout in banking stocks, people familiar with the matter said.
The QIA’s interest in Citi, which was bailed out by the government after losing $50bn in the financial crisis, comes as other cash-rich state funds are shying away from banks – often because of big losses on such investments in the past.
The QIA, which has done well on investments in Credit Suisse and Barclays during the crisis, is open to buying some of the Treasury’s 27 per cent stake in Citi, the people familiar with the matter said.
They warned that any deal would depend on price, market conditions and the government’s willingness to sell Citi shares to a sovereign wealth fund at a discount.
The Treasury said in April it would sell the 7.7bn Citi shares it received for bail-outs of the bank. It said 1.5bn shares would be sold in the market by Morgan Stanley, but have not specified how the rest would be off-loaded, raising the prospect they could place a large block at a discount with a big investor.
A person familiar with the matter said the sale of the first tranche should be completed in the coming days.
People involved in the process said the QIA had been approached about buying Citi shares, but would not say by whom, highlighting the political sensitivities in such a deal.
Citi and Morgan Stanley declined to comment, but people close to them said they had not formally approached the QIA.
The QIA, which manages an estimated $65bn-$90bn, declined to comment.
The US Treasury has granted Morgan Stanley wide latitude in handling the sale. “We have to outsource the process to Morgan Stanley so the sale isn’t tainted,” said a senior official.
Citi’s shares have fallen from $4.97 on April 20 to $3.78 at close of trading on Tuesday as the government’s holdings have been dribbled out into the market.
The Treasury received its Citi shares at $3.25.
The fall in Citi’s share priced has prompted a debate about selling shares in blocks, according to a person with direct knowledge of the process.
“We are all interested in generating interest in the shares,” the person said.
“If we dribble the shares into the market on a secondary basis, that may be the safest [strategy]. But it may not be the most economic. There are a lot of structural headwinds.”
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