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Citi borrows BILLIONS at 11% ?!?!
Old 11-27-2007, 08:18 AM   #1
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Citi borrows BILLIONS at 11% ?!?!

Wow! What good can come from borrowing at 11% ? Talk about giving away the candy store.

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Abu Dhabi will buy securities that convert to stock and yield 11 percent a year, almost double the interest Citigroup offers bond investors, underscoring the New York-based company's need for cash.
Bloomberg.com: Worldwide
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Old 11-27-2007, 09:20 AM   #2
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Wow! What good can come from borrowing at 11% ? Talk about giving away the candy store.
Bloomberg.com: Worldwide
Short-term agreement. I am sure there is an early redemption clause in there so Citi has the option to call in the debt early.

Yes, they need money, but they aren't the only bank that has issued debt or had a capital infusion to shore up their balance sheet.

Citi's not going anywhere...........
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Old 11-27-2007, 10:54 AM   #3
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Citi's not going anywhere...........
You're probably right. But I wish I had back the money I've lost in the last 30 years after I made comments like that.
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Old 11-27-2007, 02:52 PM   #4
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You're probably right. But I wish I had back the money I've lost in the last 30 years after I made comments like that.
Here's the way I look at it....Donald Trump has filed bankruptcy HOW many times, and yet the banks, including Citi, line up to loan him money time after time.

If Donald has that much clout, how much clout does Citi have??
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Old 11-27-2007, 03:00 PM   #5
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Citigroup probably falls into that segment of the finance community as being too large to let them fail. If you borrow $100,000, you're on your own.
But borrow a $100MM...the bank will take care of you, somehow.
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Old 11-27-2007, 04:45 PM   #6
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Citigroup probably falls into that segment of the finance community as being too large to let them fail. If you borrow $100,000, you're on your own.
But borrow a $100MM...the bank will take care of you, somehow.
Often we focus on whether a bank or company will survive. Another factor, as illustrated in this Citi deal, is how much dilution are the current shareholders going to suffer? Looks like a lot to me.

Ha
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Old 11-27-2007, 04:50 PM   #7
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The Fed "discount window" is the lender of last resort. So far Citi has not been there.
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Old 11-27-2007, 05:55 PM   #8
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Often we focus on whether a bank or company will survive. Another factor, as illustrated in this Citi deal, is how much dilution are the current shareholders going to suffer? Looks like a lot to me.

Ha
It is a fantastic deal for their lenders: 11% guaranteed and if they recover, convertible to common at $37.xx so all they need to do is short sell the common in case Citi doesn't make it and if they recover, convert and sell at a nice profit afte collecting 11%. Of course the large short will drive the stock further down.

Makes you realize how much smoke & mirrors there are on Wall Street.
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Old 11-27-2007, 06:37 PM   #9
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Makes you realize how much smoke & mirrors there are on Wall Street.
Makes you wonder how much of the smoke is coming from some real "Hot Potatoes" that everyone would like to hide under the rug.

The whole subprime mess reminds me of a game of musical chairs, everything is Ok as long as the music keeps playing.
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Old 11-28-2007, 07:59 AM   #10
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The whole subprime mess reminds me of a game of musical chairs, everything is Ok as long as the music keeps playing.
Same could be said about the RE run-up ... then the music stopped.
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Old 11-28-2007, 09:51 AM   #11
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Same could be said about the RE run-up ... then the music stopped.
The common element is greed. Without that this financial pornography would not have any takers...
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Old 11-29-2007, 08:44 AM   #12
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The plan to short the stock would be a pretty mediocre plan, since you have to pay the dividends of a stock you short. That would put their profit at ~11-6= ~5%. I can get that without shorting a stock

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It is a fantastic deal for their lenders: 11% guaranteed and if they recover, convertible to common at $37.xx so all they need to do is short sell the common in case Citi doesn't make it and if they recover, convert and sell at a nice profit afte collecting 11%. Of course the large short will drive the stock further down.

Makes you realize how much smoke & mirrors there are on Wall Street.
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