Citigroup forced into $20bn security buy-back


Citigroup forced into $20bn security buy-back
Citigroup faces having to buy-back billions of dollars worth of securities following a deal with US regulators.

The US Securities and Exchange Commission (SEC) has brokered a deal with the investment bank that will see 38,000 individual investors, small businesses, and charities receive all $7.5 billion (£3.75 billion) of their money back from auction rate securities (ARS) they purchased from the firm.

ARS act as a long-term debt issue, but where interest rates on the debt are flexible, sold via a dutch auction.

Furthermore, Citi will be forced to liquidate all of the $12 billion worth of ARS sold to retirement plans and other institutional investors.

In February this year the ARS market collapsed leaving Citi customers holding nearly $20 billion (£10 billion) of illiquid assets.

Citi neither admits nor denies allegations of wrongdoing, but will pay $100 million (£50 million) in fines.

The loss caused by the buy-back could stand at $500 million (£250,000) – the difference between the purchase price and the market value of the securities.

Linda Chatman Thomsen, director of the SEC's Division of Enforcement, said: "Today's agreement in principle provides real relief to investors.

"In a short period of time, about 38,000 individual, small business, and charitable organization investor accounts will receive nearly $7.5 billion in liquidity, and Citi will begin the process of restoring liquidity to over 2,600 institutional investors who hold approximately $12 billion (£6 billion) in auction rate securities."

A Citi statement read: "Our most important focus continues to be on helping our clients.

"Since the beginning of the ARS crisis, Citi has worked diligently with issuers, investors, and regulatory authorities to obtain liquidity for holders of illiquid ARS. We have made tremendous progress on these efforts, and, in fact, more than fifty percent of our retail clients' holdings in ARS have been redeemed or auctioned at par since the crisis began."

Bookmark with:
Bookmark with: Digg Digg Bookmark with: Delicious Bookmark with: Reddit Reddit Bookmark with: StumbleUpon StumbleUpon Bookmark with: Google Google Bookmark with: Technorati Technorati Bookmark with: Netvouz Netvouz

Latest News:

Search News
News Front Page
Accountancy / Tax
Advertising / PR
Armed Forces
Aviation / Aerospace
Banking / Finance
Charities / Voluntary
Childcare / Youth
Construction / Property
Customer Services
Education / Training / Teaching
Emergency Services
Engineering / Electronics
Entertainment / TV / Theatre
Graduate Roles
HR / Recruitment
Health / Beauty
Hotel / Catering / Restaurants
IT / Internet
Insurance / Pensions
International / Overseas
Management / Business
Manufacturing / Industry
Media / New Media / Creative
Medical / Healthcare
Pharmaceutical Industry
Public Sector
Retail / Wholesale
Sales / Purchasing / Marketing
Science / Technology
Secretarial / PA / Admin
Skilled / Semi-skilled Manual
Transport / Logistics
Travel / Tourism / Leisure