7% of hope
Temasek owns 261 million preferred shares of Citibank that pay 7% fixed returns. What does this mean? 7% of what? 7% of the value of the 261 mil worth of shares or 7% of the par value of the shares? If it is the latter, then nothing much to talk about as the amount will come to about US$18m pa, assuming the par value is US$1. Now, if the return is based on the total sum paid for the preferred shares, eg at US$10 each, the return will be a neat US$180m pa. The amount will vary accounting to the share price agreed upon. This is quite likely as the returns must be gauge against who Temasek could get from other fixed income products other than minibonds. Oh, maybe minibond returns are factored in as these bonds were then yielding 4 or 5% returns. Which is which, this has not been explained. 7% of what? The return must be quite sizeable or else Citi will not be attempting to force the conversion of these shares to ordinary shares earning no fixed returns. Is there a 7% of hope?