Citigroup's predicament on CDOs

The conventional wisdom right now is that Merrill Lynch's big move to offload its portfolio of collateralized debt obligations just might force Citi to follow suit. So how large would the writedown be? Goldman Sachs analyst William Tanona has suggested that if Citi's CDOs were marked at the same valuation (22 cents to the dollar), it would require a massive $16.2 billion writeoff. Ouch. Media reports hold that Citi has valued its securities at about 50 to 60 cents to the dollar; it's comfortable with that because most of the CDOs are pre-2005. It may not be forced to mark all the way to 22 cents, so there's a lot of uncertainty as to how these securities will ultimately be valued. In any case, it seems that Citi's hand is being forced.

For more:
- here's the Financial Times item

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