Saudi Prince Alwaleed bin Talal and Kuwait agreed to invest at least $5 billion in the struggling Citigroup Inc and Merrill Lynch & Co.
The news came after Citi reported a fourth-quarter loss of $9.83 billion yesterday. Citigroup’s record loss was caused by write-downs from mortgage-related securities and reserves for current and future bad loans totaling $23.2 billion, the New York Times reports. The bank said yesterday it would also lay off another 4,000 workers, on top of announced reductions of 17,000 employees, and cut its dividend to conserve $4.4 billion cash annually. Merrill Lynch has also been hard hit by the sub-prime mortgage crisis, with fourth-quarter and year results said to be announced later this week.
Prince Alwaleed, who already owns 3.6% through his Kingdom Holding Co 4289.SE, says he is among investors helping the largest U.S. bank raise $12.5 billion in convertible preferred securities, Reuters reports.
State-run Kuwait Investment Authority, a sovereign wealth fund with at least $225 billion of assets, says it will invest $3 billion in Citigroup and $2 billion in Merrill.
“As a long-term investor, the KIA believes that the markets currently provide attractive investment opportunities in the financial sector,” the KIA said in a statement yesterday, Reuters reports. For Alwaleed, the investment is a “continuation of his strong support of Citigroup, and belief in its long-term success and profitability,” he says. How much he plans to invest was not disclosed, Reuters reports.
Gulf Arab states and companies, buoyed by record oil prices to the world’s largest oil-exporting region, spent about $60 billion on foreign assets last year, almost double the previous two years combined, Reuters reports.
State-run Abu Dhabi Investment Authority agreed in November to buy $7.5 billion of stock in Citigroup.