Singapore’s GIC cuts Citigroup stake

P.R. Venkat & Costas Paris
The Wall Street Journal

Government of Singapore Investment Corp. Tuesday said that it cut its stake in Citigroup Inc. to below 5% after it exchanged its convertible preferred stock in the bank to common stock earlier this month and made a profit of $1.6 billion over the conversion price as part of the transaction.

On Sept. 11, GIC exchanged its $6.88 billion holdings of convertible preferred stock for Citigroup common stock, together with the U.S. government and other private investors, it said in a statement.

The conversion price was $3.25 per share.

“The exchange resulted in GIC having a shareholding stake exceeding 9% in Citigroup,” GIC said. Following the exchange, the sovereign wealth fund reduced its stake through open market sales, it said.

It didn’t disclose the price at which it sold the stake and how many shares it sold.

Citigroup shares closed at $4.61 on Sept. 11.

In a separate statement, GIC’s Chief Investment Officer Ng Kok Song said the fund’s original $6.88 billion investment in Citigroup made in January 2008 currently carries a valuation profit of $3.2 billion. Of that, $1.6 billion was realized after selling down its stake while the rest is based on Citigroup’s closing price Monday of $4.43 for its remaining stake, he said.

The sovereign wealth fund said that it will stay invested in Citigroup because it’s confident of its long-term prospects.

“A stake below 5% reflects GIC’s goals and desire to be a portfolio investor,” GIC said.

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.

The U.S. Treasury also agreed to convert its own preferred stock of up to $25 billion at the time. As part of that deal, GIC gave up an annual 7% coupon on its preferred stock holdings, which was estimated at about $482 million. The conversion price was also well below an initially agreed conversion price of $26.35 under the terms of the original investment.

Apart from Citigroup, GIC also holds a 9% stake in UBS AG, which it bought in late 2007.

People familiar with the situation said earlier this year that GIC lost more than 50 billion Singapore dollars on its investments last year as the result of the financial crisis. The sovereign wealth fund has a portfolio of about S$200 billion.


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