Abu Dhabi vows to fight for rights in Citi dispute

Thursday, December 17, 2009
DUBAI, United Arab Emirates Abu Dhabi’s main sovereign wealth fund, which is alleging fraud over its $7.5 billion investment in Citigroup Inc, vowed Wednesday to fight for its “legal rights” as it seeks compensation or an exit from the deal.

Word of the dispute emerged late on Tuesday when Citi issued a brief statement saying it had been hit with an arbitration claim from the Abu Dhabi Investment Authority alleging “fraudulent misrepresentations” in connection with the two-year-old agreement.

ADIA, one of the world’s biggest government wealth funds, declined to provide a copy of the claim or discuss the dispute in detail.

“It is the policy of ADIA to pursue its legal rights fully,” an ADIA spokesman said. “ADIA declines to comment further due to binding confidentiality obligations, which ADIA intends to respect.”

Citigroup earlier promised to “vigorously” fight the claims, which it said had no merit. It said ADIA was seeking to terminate the deal, made at a time the New York-based bank needed capital to offset big losses from mortgages and other investments, or receive more than $4 billion in damages.

A Dubai-based spokesman for the bank had no additional comment Wednesday.

In exchange for its November 2007 investment, ADIA received equity units that paid a high annual dividend. The units were to be converted into Citigroup common shares at a price of up to $37.24 a share starting next March and continuing through September 2011, making the fund one of Citi’s largest shareholders with a 4.9 per cent stake.

At the time, the fund’s managing director said the investment reflected its confidence in “Citi’s potential to build shareholder value.”

Since then, Citi has proved to be among the lenders hardest hit by the credit crisis and rising loan defaults.

It received one of the biggest US government bailout packages $45 billion in aid and protection against losses on more than $300 billion in assets.

Citi shares have plunged 89 per cent from the $33 range at the time the ADIA deal was made to less than $4 now.