Wednesday, March 5, 2008

Michael Sabia's daisy chain

Bloomberg: Citigroup and other banks seen needing more Arab capital

Flow of funds diagram:

Sovereign wealth funds will fund Citigroup’s continuing bailout so that Citibank can lend money on an uneconomic basis to BCE and for which Citibank has no end buyers, in order to render BCE a junk bond credit in order that Teachers’ can exceed its 30% ownership threshold and buy BCE with 20% of the purchase price, and BCE itself can fund the remaining 80% on its own totaling $42.75 and somehow meeting the Telecommunications Act requirements that Canadian telecom be owned by Canadians and promoting Canadian Telecom to become “competitive and efficient”.

Speaking of efficient, wouldn’t it just be more efficient if Dubai International Capital just bought BCE directly? That would involve less paper work and the public wouldn’t be so confused.

Citigroup and other banks seen needing more Arab capital
Submitted Wed, 2008-03-05 05:28
By Will McSheehy and Matthew Brown
Bloomberg News Service
Tuesday, March 4, 2008

DUBAI -- Banks and securities firms led by Citigroup Inc. may need more money from Arab states as losses stemming from the collapse of the U.S. subprime mortgage market increase, the head of Dubai International Capital said.

Citigroup, the biggest U.S. bank by assets, received a $7.5 billion cash infusion from Dubai's neighbor, Abu Dhabi, on Nov. 27 to replenish capital after record mortgage losses destroyed almost half its market value, leading to the departure of Chief Executive Officer Charles O. "Chuck" Prince III. Citigroup has since received cash from Singapore and Kuwait.

"In my view it will take a lot more than that to rescue Citi and other financial institutions," Sameer al-Ansari told a private equity conference in Dubai today.

Gulf states including Qatar, Kuwait, and the United Arab Emirates, flush with cash from record oil and gas sales, have bought into U.S. financial institutions such as Merrill Lynch & Co., Morgan Stanley, and UBS, after they lost more than $163 billion betting on securities backed by subprime mortgages. Banks and securities firms have raised $105 billion from selling stakes to cover subprime losses.

Qatari Prime Minister Sheikh Hamad bin Jasim bin Jaber al-Thani said Feb. 18 that the emirate is buying shares in Credit Suisee Group and plans to spend as much as $15 billion on European and U.S. bank stocks over the next year.

Abu Dhabi is Citigroup's largest shareholder, ahead of Los Angeles-based Capital Group Cos. and Saudi billionaire Prince Alwaleed bin Talal, data compiled by Bloomberg show.

State-managed funds in countries including Kuwait, Abu Dhabi and South Korea have ballooned to $3.2 trillion in assets. Fueled by record oil prices and rising currency reserves, sovereign fund assets may gain fourfold to $12 trillion by 2015, equal to the capitalization of the Standard & Poor's 500 Index, according to Morgan Stanley estimates.

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