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Archive for June, 2008

Losses Equal Write-Down Disaster for Citigroup

Analysts are forecasting that Citigroup losses will show even more write downs on subprime-related investments in the second quarter, reducing the value of its assets by $8.9 billion. The news has not been good for the nation’s largest bank and indicates more Citigroup trouble.

This is the third consecutive quarter showing Citigroup losses, and sent shares of the company’s stock to their lowest levels in more than a decade. The New York-based company has seen nearly $15 billion of losses in the past two quarters, with more than $46 billion of credit losses and write-downs since mid-2007. Now, analysts say Citigroup may write down $7.1 billion in collateralized debt obligations (CDOs) and associated hedges, and $1.2 billion for other asset classes.

A cut in Citigroup’s dividend program also is likely. This will be the second dividend cut this year. As reported June 26, 2008 on Bloomberg.com, Goldman Sachs analyst William Tanona lowered the ratings on U.S. brokerages from attractive to neutral, stating that the pace of deterioration in the financial sector is far worse than expected. Tanona also cut his six-month price target for Citigroup to $16 and put the bank on Goldman’s conviction sell list.

Goldman Sachs itself was downgraded June 26, 2008 by Wachovia, which cited renewed concerns about economic growth, slower prime brokerage business and a slowing pace of large capital raises. The downgrade caused Goldman’s stock to fall 2% to $180 in pre-market trading.

In early June of 2008, Gary Crittenden, Citi’s chief financial officer, warned of additional large write downs and credit losses in the second quarter, saying its business remained under pressure amid unprecedented market conditions. he latest news indicates Citigroup trouble is not unexpected.

Thousands to be Laid Off from New York Mega Bank, Citigroup

After billions of dollars in investor losses related to subprime-backed mortgages and other similar investments, Citigroup’s employees are the ones who will ultimately have to suffer.

The New York-based banking giant is expected to begin a round of massive lay-offs of investment banking employees this week as part of a corporate plan to reduce its workforce by approximately 65,000 individuals.

As reported in the June 23, 2008 edition of the Wall Street Journal, Citigroup is in the same boat as many Wall Street investment banks as it tries to recover from bad investments on subprime-related mortgages that caused more than $16 billion in write downs in the first quarter alone. Citigroup’s write downs and credit losses from the collapse of the subprime mortgage market now total almost $40 billion, with billions of additional write downs anticipated in the second quarter.

With more than 350,000 employees worldwide, and 9,000 former employees as of March 31, 2008 Citigroup will be hit hard. According to the Wall Street Journal article, the forthcoming job cuts are part of Chief Executive Vikram Pandit’s goal to reduce Citigroup’s annual expenses by $15 billion.

Evergreen Ultra Short Opportunities Fund Class Action

A class action was filed today in the U.S. District Court for the District of Massachusetts on behalf of purchasers of all classes of shares of the Evergreen Ultra Short Opportunities Fund (Evergreen Ultra-Sht;A, Evergreen Ultra-Sht;B,
Evergreen Ultra-Sht;C, Evergreen Ultra-Sht;I (the “Ultra-Short Opportunities Fund” or the “Fund”) who purchased or otherwise acquired shares of the Fund within three years of the filing of this lawsuit (the “Class”), seeking to pursue remedies under the Securities Act of 1933 (the “Securities Act”). Prior to August 1, 2005, the Fund was known as the Evergreen Ultra Short Bond Fund.

The complaint alleges that Evergreen Investment Management Co., LLC (“Evergreen Co.”) and certain related entities, and officers and directors, violated the Securities Act. Evergreen Investment Management Co., LLC serves as the investment advisor to a group of mutual funds marketed under the Evergreen name. Evergreen Investments is the brand name under which Wachovia Corporation (Wachovia Corp) conducts its investment management business.

On or about May 29, 2003, the defendants began offering shares of the Ultra Short Bond Fund pursuant to an initial registration statement, filed with the SEC as a Form 485BPOS (the “Registration Statement”). The complaint charges that defendants solicited investors to purchase shares of the Fund by stating that the Fund’s investment objective was to: “provide current income consistent with preservation of capital and low principal fluctuation.” The complaint alleges that these statements were materially false and misleading because the fund employed an undisclosed high-risk strategy that led to realized losses of approximately 18 percent and seeks to recover damages on behalf of the Class.

Beginning on or about June 9, 2008, the Fund’s per share net asset values declined precipitously across all share classes. On June 19, 2008 the Fund reported that it was liquidating, and that its net assets were only $403 million, far lower than the $731.4 million net asset value reported by the Fund on March 31, 2008.

Anyone wishing to serve as lead plaintiff must move the Court no later than 60 days from today. If you wish to consider joining this action as lead plaintiff, discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiffs’ counsel at the phone numbers or e-mail addresses listed below. Any member of the purported class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.

Tender Offer For Citigroup Falcon Hedge Fund to Move Forth

One of Citigroup’s much-beleaguered Falcon Strategies hedge funds has been given the green light to move forth with a tender offer initiated in May as part of its wind down.

As reported June 17 on Bloomberg.com, a New York federal judge rejected a request by investors to halt the tender offer of the Falcon Strategies Two LLC fund. In a proposed class-action suit filed May 20, investors – who were not asking for any damages – claimed the offering memorandum omitted important information and details regarding future legal claims, the value of their stakes in the fund and the shares’ current net asset value.

In the fourth quarter of 2007, Citigroup’s Falcon Strategies Two fund fell almost 53 percent in value, ultimately plummeting nearly 80 percent overall. The losses were largely attributed to the fund betting on mortgage-backed and preferred securities, as well as making trades based on the relative values of municipal bonds and U.S. Treasuries.

By the end of 2007, almost 99 percent of the fund’s assets were invested in 11 Citigroup-affiliated funds engaged in the risky strategies, according to the Bloomberg article. Since March, Citigroup has been in the process of liquidating the Falcon Strategies Two fund, after it suspended the fund’s redemptions and distributions. In May, Citigroup revealed that the U.S. Securities and Exchange Commission (SEC) had requested records related to the bank’s hedge funds but did not identify the specific funds.

The Falcon fund initiated its tender offer on May 8, with a scheduled expiration date of June 30. According to the offering documents, the offer would pay 45 cents a share. The shares, valued at $1 each when the fund began in 2004, now have a net asset value of 19 cents to 21 cents, according to court papers. The turn of events surrounding Citigroup’s Falcon Strategies hedge fund has no doubt left investors feeling duped and cheated. Unknown to them, the Falcon Strategies funds were not, as promised, the safe alternatives to money market investments. Instead, investors found themselves in extremely high-risk investment strategies – so much so that the funds ultimately lost the majority of their value.

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