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Citi debt issue fuels concern

CITIGROUP yesterday scuppered its own efforts to appear healthy enough to repay $45bn (&pound;27bn) in Troubled Asset Relief Programme (Tarp) funding as it took advantage of a government guarantee to issue $5bn worth of bonds.<br /><br />The bank, led by chief executive Vikram Pandit, is keen to show that it can survive without state support, a condition of it paying off the government&rsquo;s 34 per cent stake in the bank.<br /><br />But despite suggestions that the bank is planning a capital-raising of sufficient size to end its Tarp participation, the decision to issue the state-backed two- and three-year bonds will cast doubt on the WallStreet giant&rsquo;s financial strength.<br /><br />Most of the bank&rsquo;s rivals have already stopped using the bond guarantee scheme and the fact that the facility closes in six weeks will prompt speculation that the bank is desperately trying to issue state-backed debt while it still can.<br /><br />One of the conditions of exiting Tarp is that a bank can demonstrate its ability to issue debt without any guarantees.<br /><br />Meanwhile, Richard Parsons, Citigroup&rsquo;s chairman, is joining Providence Equity Partners as a senior adviser, the Rhode Island-based private equity firm said yesterday.