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December 17, 2009

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ADIA takes Citigroup to court

THE Abu Dhabi sovereign wealth fund is vowing to fight for its "legal rights" after filing a claim against Citigroup over its US$7.5 billion investment in the bank.

A spokesman for the Abu Dhabi Investment Authority said yesterday ADIA would not comment further, citing "binding confidentiality obligations." It also declined to provide a copy of the complaint.

Citigroup Inc said on Tuesday that ADIA has filed a claim against the bank seeking to either terminate a deal to buy US$7.5 billion worth of its stock or receive damages of more than US$4 billion.

ADIA, one of the largest sovereign wealth funds in the world, invested US$7.5 billion in Citigroup in November 2007, offering the New York-based bank needed capital to offset big losses from mortgages and other investments.

The fund received equity units that paid a high annual dividend. The units were to be converted into Citigroup common shares at a price of up to US$37.24 a share between March 15, 2010, and September 15, 2011, making the fund one of Citi's largest shareholders with a 4.9 percent stake.

But the bank proved to be among the hardest hit by the credit crisis and rising loan defaults, and received US$45 billion in aid from the United States government.

Since the end of November 2007, Citi shares have tumbled 89 percent from the US$33 range to less than US$4. At US$37.24 per share, the conversion price would amount to more than 10 times Citi's closing stock price on Tuesday of US$3.56.

ADIA's arbitration claim, filed in New York, alleges "fraudulent misrepresentations" over the sale.


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