Some deals are good for both parties in the transaction. Others are one-sided or short-sighted. That’s my opinion on the CitiDhabi deal. It looks great for Abu Dhabi but then again, that’s what I said about Bank of America’s investment in Countrywide before CFC lost another 50%. To be honest, the Citi deal concerns me and as I wrote last night, this is not a negotiation from strength and neither does it solve the weakness or create strength. Maybe Citi management (whoever that is at the moment) feels they needed to do this deal but I find the terms to be absurd. Supposedly they were trying to guarantee the dividend would not be cut to make sure they wouldn’t have to go back on their word. If you are a common shareholder, maybe you’d now prefer to have a dividend cut. I know I would. Paying Abu Dhabi 11% when common shares were already yielding 7% is a bit nutty. Paying Abu Dhabi the equity equivalent yield of junk bond debt is a bit nutty. Paying Abu Dhabi more than Citi charges their best credit card customers is a bit nutty. Paying Abu Dhabi about 50% more than what Countrywide paid BAC is nutty. Paying Abu Dhabi about 400 bps more than an average preferred stock is nutty. Paying Abu Dhabi 700 bps over its 3-year CD yield is nutty. Furthermore, the dilution to existing shareholders is going to be substantial. What it says to me is that Citi was not confident that it could build its capital base through operations for the next year or so to provide enough cash to meet the regulatory ratios and pay the common dividends that Abu Dhabi is going to fund. Think about that when you hear how the worst is behind us. This transaction is more about the worst in front of us or they never would have done this. So now that Citi’s Tier 1 is sitting at 7.9% how long will that last? What happens if and when this crisis gets worse and it falls back down to a Tier 1 in the 6% range? Is Abu Dhabi going to fund that too or will Citi have to find a new sugar oil daddy? I suspect those terms will likely be as bad or worse for existing shareholders as the current one is. This looks like a good deal for Abu Dhabi. Good for them.