On Nov 27, 2007, at 11:23 AM, Jordan Hayes wrote:
> Doug then asks:
>
>> When do all these (growing) foreign claims on the U.S. become
>> a sign of weakening rather than evidence of imperial strength?
>
> Well, if you're talking about this current deal, it's not a claim at
> all: it's non-voting, non-control insider sweet deal. It's just some
> cash at a critical time (in the news, not actually in the boardroom)
> that will be seen as a smart move later. By both sides.
It's a mandatory convertible, no? When converted, the stake becomes voting, though it'll be less than the magic 5%. And at 700 bps over Treasuries, the current coupon is above junk bond levels - despite the equity kicker. For ADIA, it's a steal. For Citi, it's a vote of confidence, but what's their balance sheet? $280 billion? A quarter's writeoffs could consume the $7.5b.
By the way, Melissa Lee just said on CNBC that after Prince Alwaleed bin Talal's bought his stake in Citi, the stock fell by another 44%. It paid off in the long run, but if that's a precedent, the problems aren't over yet.
Doug