(Corrects 7th paragraph to say $55 billion, not $55 million)
By Nate Raymond
March 28 Citigroup Inc has prevailed in
the latest arbitration pursued by Abu Dhabi Investment Authority
over the sovereign wealth fund's $7.5 billion investment in 2007
to shore up the then-struggling bank during the subprime
Documents in the case were unsealed on March 20 in Manhattan
federal court, where Citigroup filed a petition earlier in the
month to have a federal judge confirm a decision an arbitration
panel issued in December.
In their December ruling, arbitrators ruled that a
contractual clause the investment authority said the bank had
breached "does not impose continuing obligations on Citigroup
regarding the commercial reasonableness of its decision making."
The panel also awarded Citigroup nearly $9.5 million in
legal fees and expenses, the documents said.
Citigroup said in a statement on Tuesday that Abu Dhabi
Investment Authority's investment "was a testament to the
strength of that relationship, and we regret that the investment
led to this outcome."
The investment authority, headquartered in the United Arab
Emirates' capital, declined to comment. In court papers, it said
it disagreed with the ruling but would not challenge it.
The arbitration arose from Citigroup's efforts to shore up
its capital base after announcing in November 2007 that it had
$55 billion in exposure to subprime mortgages.
Anticipating $8 billion to $11 billion in losses due to
write-downs, Citigroup reached a deal in which the Abu Dhabi
fund invested $7.5 billion in exchange for a 4.9 percent stake
in the bank.
The investment authority also received securities that could
be converted to common stock at $31.83 to $37.24 from March 2010
to September 2011.
As the U.S. financial crisis deepened, Citigroup had to take
two government bailouts.
The investment authority filed for arbitration in 2009,
accusing Citigroup of fraudulently inducing its investment, in
part by issuing preferred shares to other investors that diluted
A panel of the International Centre for Dispute Resolution
of the American Arbitration Association rejected the claims in
2011, and federal courts in New York upheld that ruling.
But in 2013, the investment authority sought a second
arbitration, raising two claims, including breach of contract.
Citigroup sued to block the case, which the bank said sought
more than $2 billion or to rescind the investment. But in 2015,
a federal appeals court declined to block the case.
The case is Citigroup Inc v. Abu Dhabi Investment Authority,
U.S. District Court, Southern District of New York, No.
(Reporting by Nate Raymond in Boston; Additional reporting by
Tom Arnold in Dubai; Editing by Lisa Von Ahn)