The Kuwait Investment Authority (KIA), the country’s sovereign wealth fund, has sold its entire stake in Citigroup Inc. (C) and made a 37% return on its initial investments. The KIA converted all its preferred shares to common shares and sold the stake for $4.1 billion, making a profit of $1.1 billion.
The KIA had invested $3 billion in Citigroup by acquiring the preferred shares in January 2008 to help the bank strengthen its capital position when it was hit hard by the subprime-mortgage losses in the U.S. At that time, the KIA had also invested $2 billion in Merrill Lynch, which was bought by Bank of America Corporation (BAC) in 2008.
The stake sale news by KIA comes in the midst of Citigroup’s effort to seek the government’s approval to allow it to repay the TARP fund. Last week, Bank of America has announced its plan to repay the TARP fund. This has increased the pressure on Citigroup and Wells Fargo & Company (WFC), both of whom have also borrowed from the TARP.
In September, the Government of Singapore Investment Corp. realized a profit of $1.6 billion by selling around half of its Citigroup stake after converting its preferred shares to ordinary shares.
Prior to the investment by KIA in Citigroup in January 2008, Abu Dhabi Investment Authority (ADIA) had invested $7.5 billion in Citigroup in November 2007. The investment was made in return of an 11% dividend until March 2010 when it has to start buying the bank’s common stock. As per the deal, the units will be converted at a price of not less than $31.83 per share. Incidentally, both KIA and ADIA had been criticized for their investment in Citigroup when the shares plunged with the worsening of the economic crisis.
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