NEW YORK -- Citicorp, the nation's largest banking company, said yesterday that a member of the Saudi royal family, Prince Waleed bin Talal, had agreed to invest $590 million.
The investment will make Prince Waleed the largest single shareholder in Citicorp. The prince, who quietly bought 4.9 percent of Citicorp's common stock in the last months of 1990, eventually could own as much as 14.9 percent of the company if he converts his new preferred stock to common stock. But he will not be represented on Citicorp's board and has promised not to try to gain control over the company.
Citicorp, encouraged by the Federal Reserve to improve its financial condition, has been trying since October to raise $1 billion to $1.5 billion in capital from investors around the world.
The Federal Reserve informally approved the investment Tuesday. And it has indicated that it will grant official approval if the prince's investment rises above 10 percent of Citicorp's total common stock.
The Fed's approval is required for purchase of 10 percent or more of the stock of a U.S. bank.
Although Prince Waleed, 35, is a distant relative of King Fahd of Saudi Arabia, he has told officials at the Fed and Citicorp that he is acting on his own behalf and not as a representative of the government.
Citicorp Chairman John S. Reed said in an interview that the prince's investment was the first of several moves the company was arranging to improve its financial strength.
At a time when Citicorp's stock has fallen out of favor with investors and Moody's Investors Service has downgraded Citicorp preferred stock to a speculative "junk" rating, Prince Waleed appears to have struck a very good deal.
In addition to the 11 percent dividend on the convertible preferred stock, he could earn a profit if Citicorp stock rises above $16 a share. It closed at $15.375 yesterday.
The 11 percent yield is roughly the same as on other Citicorp preferred issues, but the other issues do not have the potential for gain if the stock price improves.