Weak Securitization Market Impacts Asset Sales by Citigroup (C) and Others

Executives at Citigroup Inc. (NYSE: C) and other big banks are finding it hard to sell unwanted assets during the recovery from the economic crisis due to a weak securitization market, according to a report in the Financial Times.

According to the sources cited in the report, Citi has started talks to sell $3 billion in car loans to equity groups and hedge funds as a part of the company's strategy to clean up its balance sheets.

Citi has reportedly tried to make the potential offer more enticing by providing financing for the loans for years after the sale. The initial reaction from potential buyers has been positive according to the sources.

However some of the potential bidders are shying away as the lack of a strong market for securitized bonds has made the market less attractive.

"Private equity can't make a bid on anything where the business model requires a bet that the external funding markets and securitization comes back," said the head of a big private equity firm, one of the sources cited report.

The market for securitized bonds was all but wiped out by the financial crisis and while the market has shown flickers of life recently, many investors are still staying away.

The Financial Times also cited American International Group Inc. (NYSE: AIG) as one of the other big banks that will be taking steps to sell unwanted assets.

Shares of Citigroup are currently at $3.23, up a penny in premarket trade on Monday.

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