November 29, 2007 (LPAC)--Citigroup's situation is "desperate," and that is why they made the deal with Abu Dhabi. In order to reconstitute part of its capital eroded during 2007, Citigroup made the deal; but they will pay ADIA a fixed rate of 11 percent per annum on each equity unit until conversion, between March 2010 and September 2011. This is well above junk bond yields, which stand at 9.4 percent, according to Merrill Lynch data.

CIBC World Markets financial services analyst Meredith Whitney, whose comments prompted Chuck Prince to resign earlier this month, said that the ADIA investment in Citigroup is "desperate." "This $7.5bn is just not enough money by a long shot", she said to the Telegraph.

The whole system is finished. But, the question is, who is more stupid: Citibank for taking an 11% loan on $7.5 billion dollars, or the Abu Dhabi fund, for thinking that Citibank can actually meet the terms of the deal.