December 06, 2009
Kuwait sale of Citi
I am intrigued by this, FT.com - Kuwait fund sells $4bn Citi stake. The timing is interesting. It's quiet (not high profile) and rather clearly says that holding on longer from their view is not ... the best use of their capital.
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It's also great timing considering the upcoming Majlis AlUmma interpellations of ministers. The MPs had heavily criticized the deal back in early 2008 as not likely to result in any earnings. So this is a way of telling them "we know what we're doing".
Also there's a great deal of pressure on KIA to "do more" locally. One of the measures being promoted is the purchase of all consumer loans extended to Kuwaiti citizens - a KD 6 billion "gift". So this announcement also is a boost for the strategy of foreign investments.
This contrasts with the rather dismal performance of ADIA's US$7.5 billion purchase of Citi preferred securities (actually a convertible bond) two months earlier in November 2007. Problem is that it's a mandatory convertible at over $30 per share versus Citi's current US$ 4 per share.
KIA's original deal had a similar strike price - the 2Q09 preferred securities exchange allowed them to get the strike price reset to $3.25 per share. So not a bad time to take the money and run.
Posted by: Abu Arqala at December 7, 2009 05:54 PM
Here's an excellent example of calls for KIA to invest at home.
Posted by: Abu Arqala at December 7, 2009 11:16 PM