Citi’s loan-sale headache

Citi’s (C) sweetening the pot for the buyout crowd as it tries to lighten the load on its balance sheet. The bank is allowing private equity firms to pick and choose which assets they want to bid on as Citi seeks to raise cash by selling $12 billion worth of leveraged loans. Citi, which has already taken some flak for financing the sale at favorable terms, is now asking firms including Apollo, TPG and Blackstone (BX) to choose from a menu of loans behind seven major buyout deals, the Financial Times reports. The decision smacks of desperation to Yves Smith, who writes at Naked Capitalism that “it’s a foregone conclusion that the big bank will be left with the worst assets” among those offered for sale.

Citi isn’t the only big financial firm that may soon be taking some pain on the loan-sale front. Deutsche Bank (DB) is close to nailing down a deal that would allow it “to sell billions of dollars of high-risk debt to several private-equity firms at prices just below 90 cents on the dollar,” The Wall Street Journal reports. The Journal reports that a sale as envisioned could rid the bank of “at least half of the roughly $16 billion of LBO loans it has been forced to hold after the credit crunch caused investors to balk at buying them.” But Felix Salmon notes that a report in thedeal.com puts the price at closer to 85 cents a share and the deal size at $5 billion or so, and wonders how healthy such a deal would really be for Deutsche Bank.