Apollo, TPG, Blackstone pay $12 billion for Citi debt
Posted Apr 9th 2008 11:00AM by Douglas McIntyre
Filed under: The Blackstone Group, Texas Pacific Group, Apollo Management, Investments, Value and lack thereof
Citigroup (NYSE: C) would like to get a number of troubled loans off its balance sheet before its reports earnings. Accordingly, it is close to selling $12 billion in leveraged loans and bonds to private equity firms Apollo Management, Blackstone (NYSE: BX) and TPG. The debt would be sold at "an average price slightly below 90 cents on the dollar," according to Reuters.
Citi has, by its own calculation, about $43 billion of these loans on its balance sheet. It is anxious to get rid of as much of the exposure as possible. But the potential deal raises a point. If the haircut on the loans is only 10% and the smartest equity firms in the world want the paper, why is Citi so anxious to sell it?
The answer is panic. At this point American banks are taking so much risk off of their balance sheets that some assets, which are only modestly impaired, are being sold along with those which have relatively low inherent value.
In Citi's haste to solve its problems, the baby may be exiting with the bathwater.
Douglas A. McIntyre is an editor at 247walls.com.
Tags: Apollo Management, ApolloManagement, BX, C, Citi, TPG
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