Comments on: Another Analysis of the Citi-Abu Dhabi Deal http://www.nakedcapitalism.com/2007/11/another-analysis-of-citi-abu-dhabi-deal.html Mon, 23 Nov 2009 11:04:35 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Peatey http://www.nakedcapitalism.com/2007/11/another-analysis-of-citi-abu-dhabi-deal.html#comment-1974 Peatey Thu, 29 Nov 2007 13:36:00 +0000 http://www.nakedcapitalism.com/2007/11/another-analysis-of-the-citi-abu-dhabi-deal/#comment-1974 yves, I think you misunderstand Clavell's breakdown of cashflows. Mandatories like DECS can be broken into cashflows that would result from having the 4 components as laid out. There is no optionality about the transaction, just that the cash-flows to the holder of the DECS are exactly modeled with the constructed portfolio (in fact, this is how many analysts value a DECS, by adding up the stock and option prices with the dividend).<br/><br/>Keep up the great work. yves, I think you misunderstand Clavell’s breakdown of cashflows. Mandatories like DECS can be broken into cashflows that would result from having the 4 components as laid out. There is no optionality about the transaction, just that the cash-flows to the holder of the DECS are exactly modeled with the constructed portfolio (in fact, this is how many analysts value a DECS, by adding up the stock and option prices with the dividend).

Keep up the great work.

]]> By: Yves Smith http://www.nakedcapitalism.com/2007/11/another-analysis-of-citi-abu-dhabi-deal.html#comment-1971 Yves Smith Thu, 29 Nov 2007 06:09:00 +0000 http://www.nakedcapitalism.com/2007/11/another-analysis-of-the-citi-abu-dhabi-deal/#comment-1971 Anon of 1:00 AM,<br/><br/>Agreed. In my earlier post on this topic, I grumbled that everyone who said that this deal was good for Citi ignored Citi's liquidity needs. They'd be better off cutting the dividend and hoarding cash, but you can't do that if you need to sell equity to shore up your balance sheet. (Actually, they could if they were willing to sell assets instead, which in a less troubled market would have been a better option). Anon of 1:00 AM,

Agreed. In my earlier post on this topic, I grumbled that everyone who said that this deal was good for Citi ignored Citi’s liquidity needs. They’d be better off cutting the dividend and hoarding cash, but you can’t do that if you need to sell equity to shore up your balance sheet. (Actually, they could if they were willing to sell assets instead, which in a less troubled market would have been a better option).

]]> By: Anonymous http://www.nakedcapitalism.com/2007/11/another-analysis-of-citi-abu-dhabi-deal.html#comment-1970 Anonymous Thu, 29 Nov 2007 06:00:00 +0000 http://www.nakedcapitalism.com/2007/11/another-analysis-of-the-citi-abu-dhabi-deal/#comment-1970 Re: trust preferred equity has tax advantages for Citi so the real cost is 11%*0.615 = 6.76% , pretty much in line or even slightly lower than the current [uncertain] dividend yield.<br/><br/>Last time I checked rates were falling and there was talk of a liquidity trap. guess the subprime thing is over; so whats next, Orange County-like defaults from coast-to-coast? Re: trust preferred equity has tax advantages for Citi so the real cost is 11%*0.615 = 6.76% , pretty much in line or even slightly lower than the current [uncertain] dividend yield.

Last time I checked rates were falling and there was talk of a liquidity trap. guess the subprime thing is over; so whats next, Orange County-like defaults from coast-to-coast?

]]> By: Independent Accountant http://www.nakedcapitalism.com/2007/11/another-analysis-of-citi-abu-dhabi-deal.html#comment-1966 Independent Accountant Thu, 29 Nov 2007 02:47:00 +0000 http://www.nakedcapitalism.com/2007/11/another-analysis-of-the-citi-abu-dhabi-deal/#comment-1966 I agree. Citigroup stock has plenty further to fall. I agree. Citigroup stock has plenty further to fall.

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