In news just out, GIC has agreed to convert its preferred stake in Citigroup to Common Equity, to go along with the US government’s continued bailout plan for the company.

GIC converts preferred notes in Citigroup to common shares
By May Wong, Channel NewsAsia | Posted: 27 February 2009 2026 hrs

SINGAPORE: The Government of Singapore Investment Corp (GIC) has said it will convert its convertible preferred notes in the US lender Citigroup to common stock in a bid to help shore up the troubled US lender.

The exchange price is US$3.25 a share – a 32 per cent premium to Citigroup’s closing price on Thursday. The price is way under the conversion price of US$26.35 a share under the original terms of the investment.
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Late 2007 and early 2008, GIC made a couple of investments in UBS and Citigroup. A few months later, the stock prices of these investments had declined, but Lee Kuan Yew was quoted in the press as saying:

“The franchise of the banks, the expertise that they have, under proper leadership, they will be able to recover and rise again … Will there be another Swiss bank like UBS for wealth management? I doubt it, we doubt it, that is why we invested in it.” Citigroup, he added, had “an enormous spread worldwide as a retail bank”.

Recover and rise again?

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But Pandit seriously doesn’t have much of a chance. Wells Fargo is paying much more and is not requiring any assistance from FDIC, in contrast to Citigroup’s relatively pathetic bid which involved “FDIC agreeing to absorb up to $42 billion in losses should Wachovia’s $312 billion pool of loans later turn sour.” The withdrawal of FDIC involvement will surely mean a goodbye to Citi’s bid for Wachovia, but Pandit must have known better than to expect that his paltry offer would have been the best in the market.

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