Citigroup Inc. insisted Tuesday that it remains committed to its acquisition of Wachovia Corp., as the failure of the government's financial rescue plan cast doubt on the bank's willingness to close the deal.
On Monday, Citigroup agreed to buy the banking operations of the Charlotte, N.C.-based bank for $2.16 billion in a deal orchestrated by the federal government.
In addition to assuming $53 billion worth of debt, Citigroup agreed to absorb up to $42 billion of losses from Wachovia's $312 billion loan portfolio. The Federal Deposit Insurance Corp. agreed to cover any remaining losses in exchange for $12 billion in Citigroup preferred stock and warrants.
But the failure of the government's proposed $700 billion bailout for financial institutions Monday afternoon cast doubt on whether Citigroup could rid itself of some of Wachovia's bad debt.
While the proposal would have prevented most banks from profiting on the sale of troubled assets to the government, an exception would have been made for assets acquired in a merger or buyout.
That would've let Citigroup sell Wachovia's distressed mortgage-related assets to the government for a profit.
Citigroup said in a statement Tuesday that it remains "committed to the orderly consummation of the transaction."
The deal, which has been approved by the boards of both companies, is still subject to approval by Wachovia's shareholders and regulators, and must be completed by Dec. 31, according to Citigroup.
