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Kuwait emerges as key to US banks’ funding plans

KUWAIT’S sovereign wealth fund is emerging as a key investor in plans by Merrill Lynch and Citigroup to raise about US$19 billion (S$27.2 billion) to help shore up their balance sheets, according to media reports.

Merrill is in talks to raise up to US$4 billion worth of fresh capital with the Kuwait Investment Authority (KIA).

The sovereign wealth fund is understood to be one of the big investors in the latest consortium.

The embattled bank is expected to reveal further write-downs of between US$10 billion and US$20 billion related to its exposure to United States sub-prime lending when it announces quarterly earnings on Thursday.

The KIA is reportedly also prepared to invest up to US$3 billion of the US$8 billion to US$14 billion of new investment that Citigroup wants to raise under the helm of Mr Vikram Pandit, its newly installed chief executive.

The US$200 billion KIA had no immediate comment yesterday on a report that it might buy into Merrill and Citigroup, reported Reuters.

A KIA public relations official referred calls to managing director Bader al-Sa’ad, who could not be reached in his office or on his mobile.

The KIA manages the surplus revenue of the Middle East’s fourth-largest oil exporter.

It had at least US$213 billion in assets at the end of March last year, according to official data.

The Wall Street Journal reported last Friday that Saudi Arabian Prince Alwaleed bin Talal will inject new cash into Citigroup.

Prince Alwaleed is Citigroup’s largest individual shareholder.

The Journal also reported that China Development Bank might invest US$2 billion in Citigroup.

The remainder is expected to come from public market investors.

Wall Street firms hit by losses related to their US sub-prime exposure have been turning to outside investors in droves.

In November, the Abu Dhabi Investment Authority, the investment arm of Abu Dhabi, injected US$7.5 billion into Citigroup in return for a 4.9 per cent stake.

Last month, Merrill agreed to deals to raise up to US$5.2 billion from Temasek Holdings, Singapore’s investment company.

Merill also accepted US$1.2 billion from Davis Selected Advisors, the US asset manager.

China Investment Corporation, meanwhile, agreed to inject US$5 billion into Morgan Stanley in return for a 9.9 per cent stake.

 

Source: The Straits Times 15 Jan 08

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