Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
New York (HedgeCo.Net) – Citigroup Inc. has purchased Wachovia’s banking operations at a price tag of $2.16 billion, or roughly $1 a share, after losses stemming from bad mortgages rendered a resurfacing nearly impossible. Citigroup will now have around 4,300 branches and offices and will surpass JPMorgan Chase as the largest U.S. bank by deposits.
Treasury Secretary Henry Paulson was pleased with the purchase, and said that a failure of Wachovia “would have posed a systemic risk" to our country’s financial system.
Wachovia is yet another casualty of the credit crisis and has suffered over $42 billion in losses from the subprime fallout. As the largest lender of adjustable-rate mortgages, Wachovia saw its shares plunge amidst a record number of defaults on home loans, particularly in Florida and California. The ARM’s offered low “teaser” introductory rates, luring subprime candidates. Many borrowers ended up owing more than what their home was actually worth.
Citigroup will absorb the bank’s losses, while trying to raise an additional $10 billion to pay off Wachovia’s senior and subordinated debt. Charlotte-based Wachovia will retain its Evergreen Asset Management unit, along with its retail brokerage unit, which oversees over $1 trillion in capital.
The purchase will help change the once gloomy outlook for Citigroup, who at one point this year, thought they might collapse themselves after writing down over $46 billion and being one of the hardest hit banks of the housing crisis. Citigroup posted losses in three consecutive quarters, but now says it plans on reducing expenses b more than $3 billion annually.
Citigroup CEO Vikram Pandit has assured investors that he is working closely with Wachovia CEO Bob Steel in an effort to make the transition with “precision” and “speed.”
The deal will no doubt help shed a more positive light on Pandit, after a period of bad press involving the now collapsed hedge fund he founded and eventually sold to Citigroup. The bank, after paying $800 his Old Lane Hedge Fund, $165 million of which went directly into Pandit’s pocket, decided to close up shop this summer after suffering unsustainable losses.
The merger will give Citigroup an almost 10 percent share of the U.S. banking market, with deposits globally exceeding $1.3 trillion.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
International Herald Tribune – Lehman Brothers said Monday that it would sell for $2.15 billion much of its money management business, including its prized Neuberger Berman asset management unit, to Bain Capital and Hellman & Friedman.
The sale of the business, more than a month in the making, has been among the biggest outstanding issues for Lehman, which filed for bankruptcy protection two weeks ago. Barclays of Britain bought Lehman’s United States capital markets division. Nomura Holdings of Japan is buying many of Lehman’s assets in Europe, the Middle East and Asia.
Before Lehman collapsed, it had proposed selling off a major stake in its investment management division, which includes Neuberger, as an integral part of a self-help plan. Then, it expected to fetch bids that would have valued the unit as high as $7 billion.
Reuters – LaSalle Investment Management has raised a $3 billion (1.64 billion pounds) "opportunity" fund for Asian property, saying it is interested in investing in Japan, China and South Korea.
The fund management unit of property services firm Jones Lang LaSalle said in a statement on Friday that the fund would use borrowing to boost its spending power to as much as $12 billion.
The company told Reuters in June that it expects assets under management in Asia to double in the next three years from about $11 billion now.
"Asia remains a key strategic priority for our business and we have a very active plan to grow our operations in the region," LaSalle’s managing director Philip Ling said in the statement.
Reuters UK – DEGI, a fund management unit of Aberdeen Property Investors, has bought one of Warsaw’s biggest business parks for 167 million euros (135 million pounds) in a bid to boost its exposure to Poland’s fast-growing economy.
The 43,700 square metre Marynarska Business Park was bought from developer Ghelamco on behalf of investors in DEGI’s open-ended international property mutual fund.
The newly built property is 99 percent let to Polish and international tenants specialising in the services sector, DEGI said in a statement. Yield details were not disclosed.
The Money Times – Last year, I read an article in which David Herro outlined his rationale for owning shares of UBS in his Oakmark International fund. He focused on the value of its wealth management unit, which delivers stable earnings and benefits from the spread of wealth across the globe. Fair enough, but UBS’ most recent quarterly results show the bank’s abysmal performance in other areas is now tarnishing its crown jewel.
After a fourth straight quarterly loss due to subprime writedowns, UBS’ Wealth Management unit suffered net outflows of 19.3 billion Swiss francs ($18.8 billion) — its first net outflows since the fourth quarter of 2000.
In response, the bank is reversing its "one bank" strategy by giving increased autonomy to its three businesses: Investment Banking, Wealth Management, and Asset Management. The initiative could pave the way to a spinoff or sale of the investment banking business.
The DIFC has clarified its position on news reports that have recently appeared regarding ‘Rashed Investment Bank’ an Islamic investment bank which has been proposed to be set up in Dubai. The DIFC said that while it welcomes initiatives within the Islamic finance industry, the “DIFC clarifies that it is not a member of the founding consortium of ‘Rashed Investment Bank’ and does not have a financial stake in the venture.”
Word had appeared in some media outlets that a new Islamic investment bank was going to be set up in Dubai, would have authorised capital of around $1 billion. The report which initially broke in the UAE’s Al Bayan newspaper claimed that the new bank would deal in hedge funds, structured products and equity capital markets.
It claimed that a number of investors from the UAE, Kuwait and Saudi Arabia were behind the new entity, although their identities were not made public, adding that it would be headquartered in the DIFC.
India Daily- The Bear Stearns Hedge Fund Managers are getting indicted for starting the credit crisis. According to media sources, Federal prosecutors are preparing to file criminal charges against managers of two Bear Stearns Cos. hedge funds whose collapse helped mark the start of the credit crisis. The U.S. Attorney’s office in Brooklyn is in the process of completing interviews of witnesses and other key people in the case this week, and has indicated to lawyers with interest in the case that indictments could be imminent.
The former Bear Stearns managers, Ralph Cioffi and Matthew Tannin, managed two high-profile bond portfolios for the securities firm’s asset-management unit. Bo doubt they aere one of the helpers in triggering the crisis. But are they really the root cause of the credit crisis?
