Posted October 04, 2018 10:24:58When you have a company that is so profitable that it’s able to borrow more than $9 Billion in a matter of weeks, that’s not something that you want to be in the business of investing in.
The only way you can do that is if you have an equity position.
That’s exactly what Citigroup did in 2009.
As part of its bailout plan, Citigroup acquired $1.4 billion of debt from a company called Drexel Burnham Lambert, which was then known as Credit Suisse.
Citigroup borrowed $3.8 billion to buy the company, and then it used the money to pay back $2.2 billion of its loans.
That was $9.2 Billion of debt that was held by the company at the time.
Credit Suisse was one of the biggest investors in Drexler, and in a deal that would have brought in $4.5 billion in capital for Citigroup, Credit Suse was allowed to sell its share in the company to a new company called Deutsche Bank AG.
This was all done by way of a complicated deal called a “straddle,” which meant that the money that Citigroup had borrowed from Drexle was borrowed from another bank, Deutsche Bank, which in turn was borrowing the money from Dereks.
Astrid von der Leyen, a senior partner at Citi’s law firm, says that in this case, the bank would have been the borrower of the money, which is why the bank was able to buy back the shares at such a low price.
“We had to get a deal where we got it through that this was a good deal for us and we were able to get some of the capital back,” she said.
The amount of money that was borrowed in that deal was not disclosed, but it was $1 billion.
That meant that in 2009, Citibans entire debt position was now worth $9billion, which it was worth when the bailout was passed on.
Drexler sold itself to Credit Sucels counterpart, Deutsche Bancorp, in 2012 for $2 billion, and this deal allowed the bank to recoup the $2bn.
That means that when Citigroup sold the company for $1billion in 2010, it had only $2billion in debt, and that was a pretty hefty amount.
The company was valued at $3 billion at the start of the crisis, and now it’s worth more than that.
So the company that was supposed to be a bank, Citicom, was now a hedge fund that could borrow money at a high rate of interest.
It was the perfect situation for Citibank to be.
“When the bailout took place, the hedge fund was very, very rich.
In the case of Citigroup there was no hedge fund.
There was only Citigroup,” von der Leys said.
“The hedge fund, the credit fund that was built by Citigroup to finance their own debt, was built on the premise that they could borrow at a really high rate.
The fact that they couldn’t, that they were going to have to pay down their debt and make payments on it was very worrisome.
They were not going to be able to make any money off it.”
“So what happened was they started making payments on Citigroup’s debt that were just not making it.
They had already made their money on Citicos debt.
So the hedge funds then started buying up their Citicoman bonds, which they could buy at very low rates of interest,” she added.
It’s a good story, but what did it really mean for Citicank?
“Citi had a very, really bad history in terms of its balance sheet,” von Der Leyen said.
“Citicom was the only one that had had a history of this sort of situation.
They were the only ones that were not making any money on it.
It’s not clear how much money Citigroup was actually making on the money it borrowed from the hedge funding firm, and how much it actually made on the bonds it bought from Citicomics.
It’s not like they had a large profit on Citipanomics.
But what they did do was they actually sold Citipans bonds, and Citipank actually did buy back those bonds, they actually bought those bonds back from the fund.
And the hedge funded fund was able now to take that money and use it to pay off Citigroup.”
Citi was able, as a result, to borrow $9,000,000 from the bank, and it was this amount of borrowed money that allowed Citigroup and the hedgefunds to make out big profits.
After the bailout, Citipanoi started to grow, and its debt grew even larger.
But even as Citicans debt grew,