Singapore's GIC Trims Citigroup Stake To Below 5%
Published: 9/22/2009 10:11 AM ET
(RTTNews) - Singapore's largest sovereign wealth fund, Government of Singapore
Investment Corp. or GIC, said Tuesday that it has reduced its stake in
Citigroup Inc. (C: News ) to less than 5% after it exchanged its preferred
stock in the bank to common stock earlier this month. The fund realized a
profit of US$1.6 billion on the conversion price as part of the transaction.
GIC's reduced stake in Citigroup follows divestments by other investment funds
in European and U.S. banks as they cash in on the rebound in global equity
markets.
GIC's stake in New York-based Citigroup increased to more than 9% on September
11, when it exchanged its US$6.88 billion holdings of convertible preferred
stock for Citigroup common stock at US$3.25 per share. The U.S. government and
other private investors also made similar exchanges at the same time. Following
the exchange, GIC reduced its stake to below 5% through open market sales. The
fund, however, did not disclose the price at which it sold the stake or the
number of shares that it sold.
GIC, which holds more than US$100 billion of foreign exchange reserves, noted
that a stake below 5% in Citigroup reflects its goals and desire to be a
portfolio investor in the bank. Further, the fund said it will continue its
investment in Citigroup as it is confident of the bank's long-term prospects
GIC's Chief Investment Officer Ng Kok Song said the fund's original US$6.88
billion investment in Citigroup made in January 2008 currently carries a
valuation profit of US$3.2 billion. Of the valuation profit, the company
realized US$1.6 billion after selling down its stake, while the remaining
profit is based on Citigroup's closing price on Monday of US$4.43 for the
fund's remaining stake in the bank.
In February, GIC agreed to convert its investment in Citigroup into common
stock as part of an effort to enhance the U.S. lender's capital base. GIC noted
that Citigroup's exchange offer enabled it to exchange its convertible
preferred notes to common stock at an exchange price of US$3.25 a share,
compared with the conversion price of US$26.35 under the original terms of the
investment. The U.S. Treasury also agreed to convert its own preferred stock of
up to US$25 billion at that time.
GIC was established by the Government of Singapore in 1981 to manage and invest
Singapore's foreign exchange reserves in long-term, high yielding assets. With
a network of eight offices in the world's major financial capitals, GIC invests
internationally in equities, fixed income, money-market instruments, real
estate and special investments. Apart from its stake in Citigroup, GIC also
holds a 9% stake in Swiss banking firm UBS AG (UBS), which it bought in late
2007
GIC's stake sale comes after Singapore's smaller investment fund, Temasek
Holdings, which sold its stakes in Bank of America Corp. (BAC: News ) and
Barclays plc (BCS, BARC.L) earlier in the year at a loss. These fund are now
paring their investments in U.S. and European banks, which they helped rescue
at the start of the financial crisis, in order to invest in other growth
sectors. The stake sale also suggests funds may have concerns about the outlook
for global markets and coincides with reports that the U.S. government plans to
sell its 34% stake in Citigroup.
