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

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New York (HedgeCo.Net) – Citigroup Inc. will close its $400 million Tribeca Convertible hedge fund in what will help wind down the $2 billion Tribeca Global Investments Group, according to a report published on Bloomberg.com.  The closing of the fund has not yet been made public, but investor redemptions are thought to be the reason for the fund’s demise.

The fund uses a convertible arbitrage strategy, which involves acquiring company bonds that can be converted to common stock which in turn may be shorted.  Tribeca Convertible was down a mere 5 percent this year.   

This is the latest failure in a string of attempts by Citigroup to offer their clients a broader array of alternative investments.  Two months ago they closed the $800 million Old Lane Partners, founded by Citigroup CEO Vikram Pandit, after investors redeemed over $200 million.    

Citigroup was hit hard by the subprime-related mortgage fallout last summer, forcing its hedge funds to suffer.  The bank’s Falcon Strategies funds were closed this year, even after a $500 million influx of capital by Citigroup. 

CSO Partners, another hedge fund run by Citigroup also closed its doors this year after suspending investor redemptions.  The company wrote down over $15 billion in losses the first two quarters of 2008. 

Tribeca Convertible Portfolio Managers Andrew Wang and Jeffry Chmielewski are rumored to be thinking about starting their own fund.  

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

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Times Online- Citigroup is to close an $800 million hedge fund co-founded by its chief executive Vikram Pandit, following bad returns and the loss of top managers.

The US investment bank will now buy what is left of Old Lane Partners’ assets and be forced to further write down the value of the fund in the second quarter, The Wall Street Journal reports. In the first quarter Citigroup wrote down the value of the fund by $202 million to reflect investor redemptions.

Old Lane’s closure is the latest blow for Citigroup, which has struggled with sub-prime mortgage related losses, losing nearly $15 billion in the last two quarters, forcing it to cut jobs and sell businesses.

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