Citigroup to buy up $17.4 billion in SIVs

Citigroup Inc. has agreed to acquire the remaining $17.4 billion in structured investment vehicle assets it advises as a way to complete the wind-down of these troubled products, which have become a victim of the global credit crunch.

Citigroup Inc. has agreed to acquire the remaining $17.4 billion in structured investment vehicle assets it advises as a way to complete the wind-down of these troubled products, which have become a victim of the global credit crunch.
The move is “nearly cashless,” according to the New York-based bank, since it will result in the SIVs having sufficient funds to repay maturing senior debt obligations and will result in an estimated payment of $300 million when the transaction is completed.
The Wall Street giant announced in a statement that the value of its SIV assets has fallen by $4.1 billion since Sept. 30, due to the strains of the credit markets.
Citigroup attributes the decline primarily to asset sales and maturities of $3 billion and a drop in market value of $1.1 billion since the end of the third quarter.
The firm has reduced its assets in SIVs by roughly $70 billion from the $87 billion it held in July 2007.
An SIV is a fund that borrows money by issuing short-term securities at a low interest rate and then lends that money by purchasing long-term securities at higher interest.

The bank is coming off four straight quarterly losses, including $2.8 billion on $4.4 billion in write-downs and bad investments during the third quarter (InvestmentNews, Oct. 16).