A Bad News Day For Citigroup

The punches directed at Citigroup continued to fly in today at a rate almost impossible to keep up with; causing us to forgo separate news items instead for this omnibus post. Here are the key items that came across our desk today regarding the behemoth money center bank:

• Citigroup has appeared to clumsily reverse course on their previous "pledge" not to support their ailing SIV vehicles (now apparently reaching about $66 billion; formerly as high as $83 billion) in the form of statements by one William Mills:

  ... when queried on the bank's responsibility to the SIVs, Mills said: "From a reputational point of view, if we don't step in and support these vehicles, will that somehow hurt our reputation in the market?

  File that one in "if you have to ask", I guess...

• Deutsche Bank CEO says "no thanks" to Citigroup CEO offer. He's "happy in Germany" apparently. What a charitable way to put it -- we'll file that one in "spending time with family" corporate management doublespeak...
• In a move reminiscent of HSBC's sale-and-leaseback of their UK headquarters building earlier this year (after they started taking subprime write-downs), Citigroup has sold two (of their own) NY buildings for $1.6B... and are now leasing them back. Given lofty NY property values, this may not be the dumbest move, but we still consider it a bad sign (in addition we do not know the fair market valuation of the Citi buildings and hence whether they got a good deal).

• And last but not least, from the "predictable, yet-excruciatingly-delayed" department, Citigroup SIV's Junior Sedna Debt Cut to CCC by Fitch. Some choice quotes from that article:

  Citigroup Inc.'s Sedna Finance Corp. had $867 million of junior-ranking debt downgraded 12 levels to CCC by Fitch Ratings after declines in the structured investment vehicle's assets.

  ...

  Sedna's net asset value has fallen to 54 percent, eroding nearly all the protection the downgraded ``second priority senior'' notes gets from ranking above the lowest layer of debt, Fitch said in a statement today. The securities will start losing money if the Cayman Islands-based SIV sells $500 million of assets to repay senior-ranking debt, according to Fitch.

  Losing 54% on a "can't lose" investment vehicle which is really a Cayman islands subsidiary created expressly to offload balance-sheet exposure... it all sounds so obviously foolish and sketchy in retrospect, doesn't it? And this hasn't been isolated to Citi, of course (our regular readers have an appreciation for this point).

  Harking back to the Mills quote above, we have to wonder how even bailing out such vehicles will be sufficient to fully "repair the reputations" involved. I wouldn't trust them with my money.