Business this week

Citigroup announced that it had raised $7.5 billion in capital by selling a 4.9% stake to the investment arm of the emirate of Abu Dhabi. Citi has been afflicted by a series of woes, including billions of dollars in write-downs stemming from subprime mortgages, but is also under pressure from shareholders to increase the value of its stock. Separately, in a busy week for sovereign wealth funds based in the Gulf states, a fund manager owned by the ruler of Dubai made a “substantial investment” in Sony. See article

It emerged that HSBC is transferring onto its balance-sheet $45 billion in mortgage-backed assets owned by two structured investment vehicles it manages, the biggest bail-out so far of such funds. SIVs borrow short-term to buy high-yielding securities and are having a hard time raising money.

E*Trade, a discount broker which has expanded into mortgage securities and credit facilities, received a $2.5 billion cash infusion from a hedge fund.

Northern Rock, a distressed British bank, named a consortium led by Sir Richard Branson's Virgin Money as the preferred bidder to take it over. The consortium promises to pay back immediately £11 billion ($23 billion), or almost half, of the money lent to Northern Rock by the Bank of England in a rescue package. Northern Rock shareholders objecting to Virgin's deal threw their support behind a rival bid being mooted by Olivant, a private-equity firm. See article

Owning a debt

KfW, a German development bank, said it was putting aside an extra euro2.3 billion ($3.4 billion) to cover losses at IKB Deutsche Industriebank, in which it holds a 38% stake, because of a deteriorating situation in its exposure to the American subprime-mortgage market. KfW led a group of German banks in rescuing IKB in the summer after the lender revealed large losses.

Ping An Insurance, a Chinese insurer, took a 4.2% stake in Fortis, a Belgian-Dutch financial company, becoming its largest shareholder. Chinese finance companies are estimated to have spent around $17 billion this year buying stakes abroad, including some in Blackstone Group, Bear Stearns and Barclays.

Three British bankers accused of fraud in a case connected to the collapse of Enron reached a plea-bargain deal with prosecutors in America. Each said he was guilty of wire fraud. The so-called “NatWest Three” had fought their extradition to the United States for two years. A sentencing hearing is scheduled for February.

National interests

A consortium led by British Airways and TPG, an American private-equity firm, abandoned its effort to buy Iberia, Spain's biggest airline. Caja Madrid, a state-controlled Spanish bank, recently increased its stake in Iberia, which some observers say was intended to stymie the foreign bid. See article

Rio Tinto unveiled a package of measures, including a boost to its share dividend, that bolsters its defence against BHP Billiton's proposed takeover. It also reasserted its belief that the opening offer price is undervalued. BHP Billiton remained confident about the success of its bid to combine with Rio Tinto, and so create a $350 billion mining giant.

The group that owns Yorkshire Water agreed to a £3 billion ($6.2 billion) buy-out from a consortium. Several British water utilities, viewed favourably by investors because of their comparatively stable returns, have been bought out this past year.

Philips, a Dutch consumer electronics company, said it would buy Genlyte, based in Kentucky, for $2.7 billion. The deal vaults Philips ahead of General Electric in the share of America's lighting market and adds to its presence in the country's expanding market for energy-saving light bulbs. See article

Deutsche Telekom terminated its high-profile sponsorship agreement with Team T-Mobile, citing the potential damage to its brand from the recent revelations about doping in professional cycling.

House prices in Britain fell in November by 0.8% compared with October, the sharpest drop in more than 12 years according to a survey from Nationwide Building Society.

Yuletide blues?

Consumer confidence in America plunged in November to reach its lowest level since just after Hurricane Katrina in 2005. The tumult in financial markets and the prospect of higher heating bills fed the despondency. Retailers hope that the season of goodwill will imbue consumers with optimism: sales in the post-Thanksgiving weekend, which kicks off the holiday spending spree, rose by 6.5% compared with last year. However, analysts still expect sales to drop in total in the run-up to Christmas.