Citi - help comes via Abu Dhabi Fund

The Abu Dhabi Investment Authority will invest $7.5 billion in Citigroup, offering the nation's largest bank needed capital to offset big losses from mortgages and other investments.

The cash from the sovereign investment fund of the Gulf Arab state, which has benefited from this year's surge in oil prices, will be convertible into no more than 4.9 percent of Citigroup Inc.'s equity. Citigroup characterized the investment as passive and said the fund will not be able to name any board members to the bank.

The Investment Authority will receive equity units that pay an 11 percent annual yield -- a high price for Citigroup, whose dividend yield is 7.3 percent. They will then be converted into Citigroup common shares at a price of up to $37.24 a share between March 15, 2010, and Sept. 15, 2011.

The purchase, announced late Monday, would make the Investment Authority one of Citi's largest shareholders.

"We see in Citi a highly respected company with a premier brand and with tremendous opportunities for growth," said the Investment Authority's managing director, Sheikh Ahmed Bin Zayed Al Nahayan. "This investment reflects our confidence in Citi's potential to build shareholder value."

The investment, which was expected to close within the next several days, will be considered Tier 1 capital for regulatory purposes. That will help Citi reach its goal of returning to its target capital ratios -- essentially, its ratio of cash to debt -- in the first half of 2008, the bank said.