Citigroup sells $1.7-bn of LBO fund stakes to Axa unit

Citigroup Inc agreed to sell $1.7 billion of leveraged buyout assets to Axa SA’s private equity unit as the third-biggest US bank moved to shrink its balance sheet.

Axa Private Equity was buying about 207 interests including stakes in buyout funds managed by KKR & Co, Blackstone Group and Carlyle Group, and investments Citigroup made directly in some companies such as First Data Corp Axa Private Equity Chief Executive Officer Dominique Senequier said in a phone interview.

The price at which the holdings have been acquired wasn’t disclosed in a joint statement today.

Citigroup has been selling assets following its $45-billion taxpayer bailout, and transferred those businesses, loans and securities targeted for disposal into its Citi Holdings division. Regulators are also requiring banks to reserve more capital for riskier assets, including stakes in buyout funds, making them less attractive for lenders to hold.

“This sale marks the completion of a significant share of Citi Holdings’ proprietary private equity investments and demonstrates the progress the Citi Holdings team is making in reducing non-core assets on our balance sheet,” Mark Mason, chief operating officer of Citi Holdings, said in the statement.

The New York-based lender sold more than $500 million of investments in funds managed by buyout firm CVC Capital Partners Ltd, three people with knowledge of the matter previously said in January. Last year, it transferred management of $4 billion of interests in its own buyout funds to StepStone Group LLC and sold its stakes in the funds to Lexington Partners Inc.

Axa fund
Axa Private Equity was raising $3.5 billion to buy holdings in leveraged-buyout funds from banks and other investors seeking to reduce their stakes, a person with knowledge of the matter said last week. The company bought $1.9 billion of investments in private-equity funds from Bank of America Corp in April 2010.

“This is the culmination of a highly collaborative and close working relationship with Citigroup,” Senequier said in the statement. “The excellent visibility of the quality of the assets enabled us to offer a fair price,” she added.

About 60 per cent of the portfolio comprises US-based assets, she said.

Axa Private Equity, along with Lexington Partners and London-based Coller Capital Ltd are raising a total of $14.5 billion this year to buy fund commitments that banks and other investors are seeking to sell after the 2008 financial crisis. Almost $11 billion was raised last year for these so-called secondary transactions after a record $22.8 billion in 2009, according to London research firm Preqin Ltd.