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Citigroup Inc. is showing just how committed it is to shrinking its balance sheet, as its stands poised to sell $12 billion in leveraged debt at what will likely be a steep loss to a group of private equity firms.
Bloomberg reports that buyout firms Apollo Management LP, Blackstone Group LP and TPG are in talks to take the debt off Citi's hands at discount. Earlier this month, Citi put out word that it would aggressively sell loans and bonds it holds backing buyouts of Harrah's Entertainment Inc., Alltel Corp. and First Data Corp. On April 1 The Deal's Vipal Monga wrote: Citi is joining Goldman, Sachs & Co., Lehman Brothers Inc. and Credit Suisse Group, which have already been "motivated sellers" of leveraged debt. Citi's presence, however, makes things more difficult for the three sellers, says a banker at one of the firms. "We had an easier time when only three banks were selling," the banker says, suggesting prices for debt will fall as more sellers emerge. "There's more competition." Citi agreed to provide roughly $43 billion in financing for leveraged buyouts in 2007, but the locked-up debt markets have left the bank unable to syndicate the debt out and it mostly remains on Citi's books. As Citi and other banks hold the assets, they have had to steadily mark down the value doing damage to their balance sheet and stock prices. Should Citi and the private equity firms come to deal, it could be the signal to the many distressed debt funds raised over the last 12 months that the time is right to get back into the markets and start buying up debt at bargain prices. - George White See Bloomberg story See Deal.com story on debt markets
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