<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Big blow to Saudi prince
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->London - The bad news arrived by telephone early last week at the Saudi headquarters of Prince Alwaleed bin Talal.
Citigroup, the investment that had transformed the prince from an obscure Arabian royal into the Warren Buffett of the Middle East, was spiralling down around him.
And now on the line from New York was Citigroup's chief executive, calling personally to tell Prince Alwaleed that the United States government would substantially increase its stake in the troubled financial company - a step that would cost the prince dearly.
The collapse of Citigroup's share price, to a mere US$1.50 on Friday from a record US$55 in 2006, has scorched investors worldwide. But few reputations have suffered as severe a blow as that of Prince Alwaleed, who owns about 4 per cent of the company.
In its third attempt to stabilise Citigroup, the US government announced on Friday that it would increase its ownership stake to as much as 36 per cent by converting part of its large preferred investment stake to common stock. Other preferred stockholders could own a 38 per cent stake of the bank if they all convert their shares. That would dilute existing common shareholders, who together would own just 26 per cent of the bank.
Those preferred investors include Prince Alwaleed, who injected close to US$600 million into Citigroup's predecessor, Citibank, when it was foundering in 1991. At the time, the share price of US$10 - US$2.98, adjusted for stock splits - seemed a bargain.
But Prince Alwaleed and several other investors from the Middle East and Asia, including the Abu Dhabi Investment Authority, are suffering the public embarrassment of seeing their investments in Citigroup evaporate. Now they must decide whether to lose their preferred investor status and join the investor rank and file as common equity holders alongside the US government.
The prince, like other large holders of preferred shares such as the Government of Singapore Investment Corporation, has said he will exchange his preferred stock for common shares. But the Abu Dhabi Investment Authority has not agreed to the deal and is looking to solicit a legal opinion to assess its options, people briefed on the fund's thinking said.
For Prince Alwaleed, the developments at Citigroup are a stinging embarrassment. In November, he made a public splash by increasing his Citigroup stake, thus becoming its largest shareholder when the government carried out its second financial rescue.
Asked in an interview on CNBC if he could foresee Citigroup requiring additional government money, and if he would invest again, the prince had responded with his typical flair.
'I believe this is a very far-fetched situation,' he had said, adding that in his many conversations with 'Mr Vikram', as he called Citigroup's chief executive Vikram S. Pandit, he had been assured that the bank would have enough capital for the next 12 to 18 months. 'This is cherry on the cream and we will take it.'
He could not be reached for additional comment.
As befitting his status as a Citibank saviour, the prince has received special investor care. For many top Citigroup executives, a ritual pilgrimage to see him was expected.
Early last week, Mr Pandit phoned Prince Alwaleed to propose that he convert his preferred stock - which would no longer pay a dividend - to common.
With Citigroup's preferred stock trading at around 20 to 30 cents on the dollar, the bank held out the carrot that investors might be able to convert it at a premium to its current market price.
Soon thereafter, Citigroup received word that the prince would go along.
For the prince, whose net worth was most recently estimated by Forbes at US$21 billion (S$32 billion), the new government action is just his latest investment setback.
Earlier this year, his company, Kingdom Holding, reported a US$7.9 billion loss as the values of some of his biggest portfolio investments, like News Corp, Time Warner and Songbird Estates, have plummeted.
He has suffered further indignity at home, where the share price of Kingdom has lost more than half its value since the company went public on the Saudi stock exchange in July 2007. NYT
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->London - The bad news arrived by telephone early last week at the Saudi headquarters of Prince Alwaleed bin Talal.
Citigroup, the investment that had transformed the prince from an obscure Arabian royal into the Warren Buffett of the Middle East, was spiralling down around him.
And now on the line from New York was Citigroup's chief executive, calling personally to tell Prince Alwaleed that the United States government would substantially increase its stake in the troubled financial company - a step that would cost the prince dearly.
The collapse of Citigroup's share price, to a mere US$1.50 on Friday from a record US$55 in 2006, has scorched investors worldwide. But few reputations have suffered as severe a blow as that of Prince Alwaleed, who owns about 4 per cent of the company.
In its third attempt to stabilise Citigroup, the US government announced on Friday that it would increase its ownership stake to as much as 36 per cent by converting part of its large preferred investment stake to common stock. Other preferred stockholders could own a 38 per cent stake of the bank if they all convert their shares. That would dilute existing common shareholders, who together would own just 26 per cent of the bank.
Those preferred investors include Prince Alwaleed, who injected close to US$600 million into Citigroup's predecessor, Citibank, when it was foundering in 1991. At the time, the share price of US$10 - US$2.98, adjusted for stock splits - seemed a bargain.
But Prince Alwaleed and several other investors from the Middle East and Asia, including the Abu Dhabi Investment Authority, are suffering the public embarrassment of seeing their investments in Citigroup evaporate. Now they must decide whether to lose their preferred investor status and join the investor rank and file as common equity holders alongside the US government.
The prince, like other large holders of preferred shares such as the Government of Singapore Investment Corporation, has said he will exchange his preferred stock for common shares. But the Abu Dhabi Investment Authority has not agreed to the deal and is looking to solicit a legal opinion to assess its options, people briefed on the fund's thinking said.
For Prince Alwaleed, the developments at Citigroup are a stinging embarrassment. In November, he made a public splash by increasing his Citigroup stake, thus becoming its largest shareholder when the government carried out its second financial rescue.
Asked in an interview on CNBC if he could foresee Citigroup requiring additional government money, and if he would invest again, the prince had responded with his typical flair.
'I believe this is a very far-fetched situation,' he had said, adding that in his many conversations with 'Mr Vikram', as he called Citigroup's chief executive Vikram S. Pandit, he had been assured that the bank would have enough capital for the next 12 to 18 months. 'This is cherry on the cream and we will take it.'
He could not be reached for additional comment.
As befitting his status as a Citibank saviour, the prince has received special investor care. For many top Citigroup executives, a ritual pilgrimage to see him was expected.
Early last week, Mr Pandit phoned Prince Alwaleed to propose that he convert his preferred stock - which would no longer pay a dividend - to common.
With Citigroup's preferred stock trading at around 20 to 30 cents on the dollar, the bank held out the carrot that investors might be able to convert it at a premium to its current market price.
Soon thereafter, Citigroup received word that the prince would go along.
For the prince, whose net worth was most recently estimated by Forbes at US$21 billion (S$32 billion), the new government action is just his latest investment setback.
Earlier this year, his company, Kingdom Holding, reported a US$7.9 billion loss as the values of some of his biggest portfolio investments, like News Corp, Time Warner and Songbird Estates, have plummeted.
He has suffered further indignity at home, where the share price of Kingdom has lost more than half its value since the company went public on the Saudi stock exchange in July 2007. NYT
