Citadel acquires additional E*Trade notes

By Lisa Kerner

Charlotte, N.C., April 4 - E*Trade Financial Corp. investors led by Citadel Investment Group acquired $248.61 million in total principal amount of E*Trade's outstanding 7 3/8% notes and roughly $95.6 million in total principal amount of the company's outstanding 7 7/8% notes on April 2, 3 and 4.

In addition, Citadel said it sold about $20 million in total principal amount of E*Trade's outstanding 8% notes and approximately $30 million in total principal amount of the springing lien notes, all in privately negotiated transactions for cash.

The transactions were reported in a schedule 13D filing with the Securities and Exchange Commission.

Following the transactions, Citadel and its affiliates own roughly $1.57 billion in total principal amount of the springing lien notes, $229.25 million in total principal amount of the 8% notes, $124.6 million in total principal amount of the 7 7/8% notes and $256.61 million in total principal amount of the 7 3/8% notes.

In November, E*Trade announced it was getting a cash boost of $2.5 billion in a transaction led by Citadel affiliates that included immediate funding of some $2.4 billion.

The terms of the Citadel agreement called for:

• E*Trade to receive $1.6 billion of capital in exchange for 12½% senior unsecured notes and common stock;

• Citadel to acquire E*Trade's entire asset-backed securities portfolio, including collateralized debt obligations, for $800 million in cash; and

• Citadel to invest an additional $150 million in exchange for 12½% senior unsecured notes and common stock at closing.

In addition, Citadel would nominate one representative to E*Trade's board of directors.

The New York-based E*Trade family of companies provides financial services including trading, investing, banking and lending for retail and institutional customers.

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