Kohlberg Kravis Roberts and Citigroup are moving ahead with plans to create a KKR fund to buy LBO loans from Citigroup with more loans from Citigroup. Despite the emergence of the Entity, we still consider this the best story ever.

KKR is providing $2 billion of equity funding through its Strategic Capital Fund, according to Financial News. Citigroup will underwrite $8 billion in debt financing. KKR will then use the leveraged fund to purchase LBO loans from Citigroup—and, perhaps from other banks with LBO loans that are currently being sold under-par—which will allow Citigroup to move the loans off its books without flooding the broader market with the loans.

Citi and KKR have quite a cozy relationship. The bank is one of the private equity firm's largest lenders. It reportedly had underwritten some $50 billion of loans that it was not able to syndicate. There are indications, however, that it may have since sold some of those loans by offering them to investors at 95 to 97 cents on the dollar.

Perhaps the most mind boggling aspect of this deal is that the LBO loans KKR is reportedly interested in buying are the loans Citigroup made to finance KKR acquisitions, including the buyout of First Data. Follow this closely: Citigroup is lending money to a KKR vehicle that will buy up loans Citigroup made to KKR owned companies.

The idea seems to be that investors might be more interested in buying loans made to the new KKR entity than those made to the KKR portfolio companies. But since the major assets of the new KKR company will be loans to those portfolio companies, it appears that all the new investors are buying is whatever security they get they get from that extra $2 billion in equity and, perhaps, some diversification value.

Questions are being raised—apparently by regulators and others—about how tough of a customer the KKR fund will be when it comes to negotiating prices for the loans it buys from Citigroup. How tough can you be when your buying assets with leverage provided by the seller? In short, some fear that the fund may end up paying a premium to the market price for the loans, artificially pumping up Citigroup's balance sheet.

KKR changes tactics to get finance away [Financial News via DealBook]

Sounds like at least one job at Citi is still safe. Somehow.

You remember Todd Thomson, the guy who got fired from Citigroup for either too loosely spending the company dime on Maria Bartiromo or because Chuck Prince needed a scapegoat to distract people from Citi’s performance (are C shareholders as easily distracted by someone getting canned as Jim Cramer is by his reflection?)? Even though he’s on his I’m-sorry-I-cheated-and-lost-my-job vacation with his family (a safari in South Africa), the old boy checked in with thestreet.com to say that he’s got plans to work in private equity.

Interestingly enough, Thomson told the news site that he believes himself to have “a clean and good track record.” Okay, sure. And getting funds shouldn’t be too difficult, given TT’s “business contacts and high-net-worth relationships.”

Ex-Citi Hot Shot Thomson Mulls a Private-Equity Comeback [thestreet.com]

Eddie Lampert may be betting that former US Treasury Secretary Robert Rubin is poised to take over as chief of Citigroup, according to a former colleague of both Lampert and Rubin. Earlier this week, Lampert’s ESL Investments disclosed that it had accumulated a 0.3% stake in Citi, setting off speculation about Lampert’s intentions. Speculation ranged from notion that Lampert might view Citigroup as cheap relative to it’s banking peers—this came from an unnamed banker who happens to work at Citigroup—to the idea that he might be poised to take an “activist investor” stance and agitate for change. Shares of Citigroup role 4% following the disclosure of ESL’s position.

“Lampert is tight with Rubin. He loves the man. Idolizes him. He may think that Rubin’s about to become a lot more involved at Citigroup, maybe even to take over for Prince,” the source said, referring to Citigroup chief executive Chuck Prince.

Rubin rose to Wall Street at Goldman Sachs before being appointed to the Treasury position by Bill Clinton. He is now the chairman of Citigroup’s executive committee. Early in his career Lampert worked under Rubin when he was an arbitrage trader at Goldman Sachs. This morning’s Wall Street Journal described Rubin as one of Lampert’s “leading role models.”

Yesterday CNBC’s Charlie Gasparino said that there was pressure for Rubin to take a more active role in the management of Citigroup. His position at the head of the executive committee brings him a hefty paycheck—reportedly $17 million—but some have said he doesn’t exercise much responsibility for the management of the bank. At least one banker employed at an investment bank described Rubin as “a relationship guy” whose job mainly involved using the connections he has made during his long career in finance and government to win business for the bank.

Prince’s tenure at the top of Citigroup has not been a happy one. The bank has been under-pressure from investors to change its management and some have even suggested that it spin off some of its constituent businesses. Prince is widely seen as unwilling to fundamentally change the structure of Citigroup.

Will Chorus Grow at Citi? [Wall Street Journal]

"Were you sacked, or did you quit?"
"I'm not sure, actually."

- Lord of the Admiralty to his aide.

In the last 18 months, almost half of Citigroup’s senior management for consumer operations (and we use the term loosely) has jumped ship. The latest tri-fecta being Faith Massingale, head of Citi’s international cards operation, Ashok Vaswani, head of Asia Pacific, and Joyce Phillips, head of international retail banking. Massingale and Philllips brought in $16 billion in revenue last year. While it’s not news to anyone that Chuck Prince, aside from being named for a popular brand of pasta, has been blamed for the loss of top executives, over management style, coyly termed "differences of opinions concerning company perks", the Financial Times notes that departures “lower down the chain are more worrying.” One anonymous soul commented that he doubts “whether many investors or even some more board members realize the extent of the losses.” If that doesn’t get Prince’s attention, perhaps the fact that several of the departees have joined noted arch-rival Jamie Dimon, at JPMorgan Chase will put some sauce on.

Citi unit sees exodus of managers [FT]

Maybe there's a reason Citi is putting its umbrellas away. Citi announced that it will spend $50bn over the next 10 years on "investments, financings and related activities designed to address global climate change." Citi claims the sum includes $10bn Citi has already invested in such endeavors. Unfortunately the "Let's get it done" path to profitability closely mirrors the strategy employed by the underpants gnomes in South Park (Step 1- invest in green tech, Step 2 - [conspicuous silence], Step 3 - profit!), unless "addressing global climate change" involves throwing around all that Saudi money in a way that doesn't directly choke baby seals.

In other Citi news, the first "Let's get 'er it done" spots started running last night (watch here). Seattle-based Publicis West devised the first ad, which unlike Citi's identity theft campaign, overflows with optimism, violently climaxing in the image of a boy in a raincoat letting go of his mothers hand and venturing off into the unknown, of a $20k a year gated pre-head start program. The ad is just a few 300mph tennis serves away from "impossible is nothing" style ridiculousness. A transcript of the narration in the commercial:

Who first believed in you? [my sponsor]
Listened to your dreams? [my shrink]
Got you on your way? [greenies]

We all need a partner [for tax reasons]
And Citi has the people and expertise to make it all possible [17,000 less of them]
So buy that house [who doesn't need more debt?]
Merge that company [we'll even throw in a "buy" rating]
Ask out Sally Krawcheck [seriously, Sally is crazy horny]
Start that business [No really, a social networking site for ferret owners is a great idea, here's your loan]
Send her to college [Send him to boarding school]
Steal that cable [they keep jacking up the monthly dvr/hd/on-demand rates!]
Build a fortune [1.5% per annum on that $832 from your bar mitzvah]
Take your business global [it's not an office party, it's an office "fiesta"]
Plan for the future [Citi is investing another $10bn in flux capacitors]
We all need a partner [redundant, in case you're Mormon]
A partner that helps turns dreams into realities [or a cursed monkey's paw]
Citi - Let's get it done [sounds good, but the guy on the other side of the octagon looks angry]

And...scene.

The money shot is when the Citi arch appears, starting with the word "dreams" and ending with the word "realities."

Citigroup to spend $50 bln over 10 yrs to address climate change – [MarketWatch]
Publicis, Citi Dare to Dream - [Adweek]

BP chief Lord Browne has resigned from his post, to be replaced immediately by Dr. Tony Hayward, amidst accusations that he used company money to support (and woo) his partner of four years, Jeff Chevalier. The allegations against Browne include:

• BP resources were diverted for Mr. Chevalier's use, and he was given computers and technical support staff while a company was set up for him involving BP personnel (Lord Browne is said to have helped set up a company for him to trade in mobile phone ring-tones, with Lord Browne and another executive from BP as directors.)

• A senior member of BP staff was tasked with running personal errands for Lord Browne, including delivering cash to his former lover.

• The BP chief paid for Mr. Chevalier's studies, as well as a large sum over their four years together.

• Browne discussed EU policy and Chinese textile quotas with Peter Mandelson, the EU commissioner, and Mandelson's Brazilian boyfriend Reinaldo.

• A flat in Venice bought by Lord Browne underwent repairs for which the building company presented two bills, one with VAT and one without. Mr. Chevalier claimed Lord Browne paid cash to "dodge" his tax bill.

The couple split in 2006 and as went Browne so (purportedly) went Chevalier’s new lifestyle, which would explain how this story got into all of London’s major newspapers (and now: Dealbreaker.com). Browne commented that “In my 41 years with BP I have kept my private life separate from my business life. I have always regarded my sexuality as a personal matter, to be kept private. It is a matter of deep disappointment that a newspaper group has now decided that allegations about my personal life should be made public.”

Some thoughts:
- It’s difficult to actually keep one’s private life separate from one’s business life when one’s business life is paying for one’s private life (say that five times fast).

- This may actually just be a case of the age-old American mix-up: Gay or Brit? And Chevalier is just a (well-compensated) business associate.

- Todd Thomson can’t win at anything.

- If we’ve said it once, we’ve said it a thousand times: if you pay for it yourself, you’re in the clear! (Source: Everyday Business, with Wayne Pace).

BP chief lied over affair with gay lover [This Is London]
BP's CEO to Step Down Immediately Amid Revelations of Private Life [WSJ]

Jim Cramer doesn’t want you to hate the game, or the playa. And in his column in the latest issue of New York, the “game” refers to making money; the “playas,” I-bankers (and I-bank CEOs, and, more generally, I-banks). Sure, you might be saying, why shouldn’t I hate the $54 million/year Lloyd Blankfeins and the Goldman Saches of the world? Not only are they terribly unhygienic, but they make more in an hour than I do in a month (or is that just us at DB? Don’t answer that) and I’m a jealous, small and petty person (to say nothing of my unresolved issues from childhood, which probably feed into the pettiness in a vicious, never-ending circle).

You’re saying that, right? Well Big J has the answer. If you invest said “playas,” you’ll get to be part of their “game” and your resentment will disappear because when you’re rich, you can buy the antidote to resentment. Another reason you shouldn’t hate these “playas” is because Cramer used to work for Goldman Sachs and never fails to mention this (or his relationship with Spitzer, which, let’s be honest, you really can’t blame him for, because Goldman Sachs is an incredible institution and Spitzer is essentially God’s special gift to the world and politics at large). Here are some other arguments for why you should cross Lloyd, Dick and Stanley off of your To Kill lists (hint: they all have to do with their outifts making you money, and Chuck Prince having less financial acumen than Cramer’s garbage disposal):

1. These guys are basically stay-at-home moms: underpaid and, more importantly, unappreciated.

Stop envying Goldman Sachs’ Lloyd Blankfein already. Don’t begrudge Bear Stearns’ Jimmy Cayne and Lehman’s Dick Fuld their millions. Let Merrill’s Stan O’Neal and Morgan Stanley’s John Mack get paid more than Croesus. You heard it here first: They deserve it. In fact, they deserve more than they earn now. Those five men are underpaid because they are about to make you very rich if you buy their stocks.

2. They will make you Kings of Great Neck, Dukes of Roslyn with Asset Management alone. And, not to brag or anything, but if you must know, Cramer predicted Asset Management would be a major money-maker YEARS AGO, before assets were even invented. Of course, no one at 85 Broad listened to him, just like they didn’t about gravity or 9/11.

Citigroup executives are worried that managers of activist hedge funds will try to force a break-up of the company, David Wighton of the Financial Times reports this morning.

Senior Citigroup executives fear the world’s biggest financial services company could become the target of activist hedge funds that would press for it to be broken up.

The executives believe Citigroup needs to step up its investor relations and explain better to shareholders the value of keeping its businesses together.

Many have dismissed the possibility that Citigroup, valued at $260bn, could become an activist target. But one Citigroup executive said: “Even Citigroup is not too big. It’s not impossible.”

None of executive are named in the story, and at least one person inside Citigroup (who also asked to remain anonymous) tells us that he suspects the story is a plant from executives trying to get management's attention following the campaign by The Children's Investment Fund which appears to have convinced ABN AMRO, the dutch bank at the center of a bidding contest between Barclays, the Royal Bank of Scotland and Bank of America. The fact that the executives feel the need to make their argument for better investor relations through the press, and to raise the threat of activist hedge funds, is a sign of the disfunctional culture at Citi, our source says.

Citigroup chiefs fear push for break-up [Financial Times]

Gene Simmons was just spotted on the Citi fixed income floor, accompanied by blaring KISS music, courtesy of the traders. Our Citi tipper had no idea why this was happening. Anyone have the scoop?

Comment or send any info to tips@dealbreaker.com. Info like this is always welcome, and we hope to do more SpotMarket features fueled by your anecdotes. Unfortunately, the "coolest" person who ever appeared on my old floor of 277 Park was John Edwards, although he was dressed as a member of KISS, and did carry a giant sack of money out with him.

UPDATE: We're told that Gene may be starting a hedge fund and is really into finance and like, stuff. A new reality show - "Fund of Rock?"

Earlier this week we ran into an old friend who has been trading financial stocks for several years. We were in a small bar a few steps down from street level. The wall paper was a deep red, the furniture included antique looking couches, and faux-gas lamps lit the place dimly. It was the sort of place a Victorian era vampire might feel comfortable sipping absinthe while he hunted his next victim.

“It’s not that you’re wrong on Citi,” our trader friend told us. “It’s that you’re right. But everyone agrees you’re right. This is a broken company.”

“But you’re buying it?” we asked.

“Of course. I wouldn’t give Chuck Prince more than a year,” he said, referring to the chief executive of the financial giant. “And whoever replaces him won’t have any loyalty to the structure. None of the top guys have the sort of stake in it that Chuck has to Sandy.”

Prior to becoming chief executive, Prince had worked as the bank’s top lawyer under former chief executive Sanford Weill. It was during this era that Weill had built the bank into a behemoth through mergers and acquisitions. Prince has vigorously resisted calls to fundamentally reform the bank by spinning off business. Several of the top executives at Citigroup have been recently hired from outside the bank and lack the personal ties to the Weill build-up that some feel have led to Prince’s resistance to change.

“The next boss is going to start spinning things off. None of this reduction through attrition business. He’ll make his mark by remaking the bank in a leaner, meaner image. Get out from under the shadow of Sandy. And then you’ll see the stock climb,” the trader continued. “I’m buying this thing now because I think once the rumors of Prince’s retirement get out, the stock is going to start to climb.”

He twirled the olive in the bottom of his empty martini glass and scanned the room. A trio of girls were sitting by the window. They were too far from where we sat at the bar for us to overhear their conversation. We doubted they were discussing the fate of banking chief executives.

He gestured to the barteneder for another round.

“Let’s go say hello,” he suggested. He nodded toward the girls. A smile came across his face. His bright eyes sparkled. For a brief moment we thought we saw fangs where his incisors should be. A trick of the light, no doubt.

There’s been lots of chatter about Citigroup this week in anticipation of Monday’s first quarter earnings announcement. Market Beat lists five reasons why Citigroup should be broken up. Eddy Elfenbein defends Chuck Prince against the charge that he’s doing a poor job of running Citigroup. Michelle Leder wonders if Citi will disclose the Todd Thompson settlement in its 10-K. Felix Salmon hopes that Bob Druskin will succeed Chuck Prince, pointing out that he has a very evil looking mustache. Roger Ehrenberg points out that its not a good sign when you have to pay someone $800 million just to start working for you.

So let us add some fuel to this fire. We’re hearing rumors that Robert Rubin, who has been at Citigroup since leaving the Clinton administration in 1999, may step down to take a position in Hillary Clinton’s campaign for the Democratic presidential nomination. The addition of Rubin to the Clinton campaign would no doubt be a boon to fundraising—Rubin was a favorite of Wall Street as Treasury Secretary and a fundraising powerhouse for Bill Clinton. Perhaps more importantly, having Rubin attached to the campaign would make Team Obama seem intellectually shallow, particularly on financial and economic issues.

It's official:

Citigroup agreed to buy hedge fund Old Lane Partners as part of a deal that puts a former top executive at Morgan Stanley at the head of its alternative investments group. Citigroup, the global banking giant, has spent months courting the executive, Vikram Pandit, who left Morgan Stanley in 2005 after he was blocked for a chance at running the investment bank. Financial terms were not disclosed, but The New York Times reported Friday that the transaction was expected to cost $600 million to $800 million.

Citi Gets Its Hedge Fund, and Its Banker [Dealbook]

Is there a more dysfunctional corporate culture on Wall Street than Citigroup? Even as the bank moves closer to buying a one year old hedge fund for a reported $600 million in an effort to recruit a former Morgan Stanley executive, reports are filtering out about in-fighting and backstabbing at the highest levels of the financial giant. Citigroup is thought to suffer from a lack of leadership in the top ranks but its top ranks certainly don't lack for ambition.

The word on the street is that Citigroup chief executive Chuck Prince might not last out the year, and his would be successors are angling for the top slot. Chief Operating Officer Robert Druskin is considered a force to be reckoned with, but we’re hearing his chances have been hurt by the market’s flaccid reaction to the much heralded cost-cutting measures.

The New York Post yesterday handicapped the various players.

The cutbacks could work against one of Druskin's rival candidates, Thomas Maheras, 44, the co-head of investment banking. Since cost reductions are in step with a weakened bull market, it could signal a company focus on revenue sources other than Maheras' investment banking group, which has slacked in the past two years.

Other top players considered likely candidates for the throne are Aljay Banga, 47, head of the bank's global consumer group; Michael Klein, 43, who's co-head of investment banking with Maheras, and the new CFO Gary Crittenden, 53, appointed just a month ago.

And, of course, there’s Old Lane’s Vikram Pandit. Today the New York Times reports that Citigroup may announce the acquisition of his hedge fund as early as Tuesday. He’s said to be a more than capable manager. But before you go long on Vikram, keep in mind that he left Morgan Stanley to go after the hedge fund bucks. At least one person familiar with Vikkers has told DealBreaker that they doubt he really wants to run the bank.

One more thought: where's Sallie Krawcheck on this list?

Prince's Heir [New York Post]
To Snare a Coveted Banker, Citigroup May Buy a Hedge Fund [New York Times]

The market responded to Citigroup’s much heralded—and telegraphed—restructuring and cost-cutting plan with a big Bronx cheer yesterday, dropping the stock price nearly 2%.* The paltry savings Citi said it could achieve, the fact that the biggest savings still lie years in the future, and the news that Citi’s overall workforce would keep growing seems only to have renewed calls for more fundamental changes at the financial behemoth.

More particularly, folks we spoke to who watch Citi’s stock think its time to bring down the house that Sandy Weill built. None of them would speak on the record, but Bill Smith, chief executive of Smith Asset Management, spoke to Crain’s and nicely captures the widely held sentiment.

"You can't fix a structure that's broken," Mr. Smith argues, adding that Citi's different components would collectively be worth $90 a share if they traded separately. He says its investment banking division, formerly known as Salomon Brothers, would trade at a higher price-to-earnings ratio than Citi does. So too, he argues, would Citi's Smith Barney brokerage unit and international commercial banking operations if granted their independence.

We’re also hearing that this might be the beginning of the end for Chuck Prince. For years he was Sandy Weill’s lawyer, and many think he lacks the audacity to start tearing apart the financial structure built by his mentor.

“He’s the last of Sandy’s cronies still in place,” said a banker at a rival firm. “Citi won’t work right until he’s gone too.”

[Please remember we're still looking for stories from inside Citi. Get a pink slip? Email it to us! Completely unaffected by the cuts? Let us know. Skipping work this week because, hey, you might get fired anyway? Great. Tell us about it! Send it all to tips@dealbreaker.com. Thanks]

*Editor’s note: we realize this comes perilously close to violating our rule against asserting post hoc, ergo hoc explanations for market movements. So let us once again restate our official position on why this stock—or almost any stock—moved the way it did yesterday: it was the cumulative effect of buying and selling by investors.

Wall Street not impressed with Citi cuts [Crains]

So the word on the street is that erstwhile Citigroup executive and Maria Bartiromo acquaintance Todd Thomson has reached an agreement with his former employer vis-à-vis severance. The bank declined to proffer the number to any media outlets, or even file anything with the SEC, which Michele Leder finds a bit fishy (which, in the parlance of the TT/$H-specific times, seems fitting.) Thomson did, however, tell FT that he’s “very pleased with the settlement” and is “excited to move on to some new opportunities.” We have no idea with package could be—though we heard a while back that the old boy was seeking $25 million. Considering that the cretins took away his pimp-mobile, 25+ seems extremely fair.

(Crossing Wall Street's Eddy Elfenbein's line on this: "I was really hoping for the headline, "Thomson Looking for New Partner," but no such luck." )

Citigroup settles with Thomson [FT]

Citigroup announced plans to cut or reassign 26,500 jobs today. The cuts hit the “whisper number” that Wall Street had been talking about all week—surprising some observers who had predicted that chief executive Chuck Prince might try to impress investors with deeper and wider cuts. Apparently Prince does not have this “better than expected” game down yet.

The actual job eliminations, in fact, barely exceeded the 15,000 number that had so notably failed to impress the markets earlier this year. Citi is cutting just 17,000 jobs out of its total workforce of 327,000—a number that some scoff at as barely better than attrition. “Accelerated attrition,” was how one Wall Street analyst put it to DealBreaker this morning. Only 1,600 jobs are being eliminated in New York City.

Another 9,500 jobs will be relocated from expensive financial labor markets such as New York, London and Hong Kong to less costly areas—perhaps India.

Citi remains an institution caught in a bind. Although Sandy Weill tried to build the bank into a one-stop financial institution, the dream of a unified banking firm remains largely unrealized. That dream, some believe has been stymied by regulations in the US and abroad that prevent Citi from realizing synergies from its combined business. Others say Citi has been damaged by a lack of leadership in its top ranks.

Even as it announced plans to streamline operations and save $2.1 billion this year through cost cutting, the bank is apparently considering spending $600 million to buy a hedge fund founded just one year ago by a former Morgan Stanley executive Citi wants to hire. That’s a pretty expensive executive acquisition program.

We’re looking for more news from inside Citi. And that’s where you come in. Email your Citi-cuts stories to tips@dealbreaker.com or leave a comment below.

Citi to Cut 17,000 Jobs in Broad Overhaul [DealBook]

Ask most people in finance and they’ll tell you that Citigroup has been one of the worst managed firms on Wall Street for at least a decade. (Maybe even longer but nobody who speaks to DealBreaker can remember back any further than that.) Chuck Prince is said to be under heavy pressure from his investors—especially another guy named Prince—to cut costs and get the stock price up.

Standing in the way of the plan to fix Citi, however, has been the inability of the bank to assemble a credible senior management team. Most of Sandy Weil’s “cronies”—we’re not sure why, but Sandy is the only Wall Steeter we know whose staffers are consistently referred to as “cronies”—have left or been let go. Many executive positions remain vacant, there are consistent rumors that top people are leaving and many of the top spots have been filled by outsiders. The move to hire a former Morgan Stanley bigshot by buying his hedgefund for $600 million looks like a sign of desperation to fill out the top ranks of the firm.

Can Citigroup be saved? Or do we need to destroy this Citi in order to save it? We’re inviting you to share your ideas on how to fix the bank that Sandy built.

Citigroup’s Chuck Prince was apparently disappointed by the market’s reaction to the announcement that Citi was eliminating 15,000 jobs. Now he’s throwing another 11,000 jobs onto the funeral pyre, according to published reports.

When Citigroup went public with the job cuts and other cost cutting measures, it was clear that they hoped the market would read this as a serious effort to improve Citi’s bottom line. But the stock price stubbornly refused to cooperate. This time around Citi is reportedly coming back with a plan to “eliminate or reassign” 26,000 jobs. Will this move the needle when it is announced tomorrow?

Perhaps not. According to a hedge fund trader we spoke with this morning, timing the additional job cuts announcements with news that Citi might spend $600 million to acquire one guy—former Morgan Stanley executive Vikram Pandit—and his year old hedge fund undermines the credibility of the bank when it comes to cost-cutting. Then again, the hedge fund trader we spoke with was admittedly jealous that no-one was offering him $600 million for his fund.

Citigroup’s Revamp May Trim Its Compliance Corps [New York Times]
Citigroup’s mulls U-turn on Old Lane [Financial Times]

A lot of people were surprised when Vikram Pandit left Morgan Stanley two years ago. He was widely considered a possible candidate for the top spot at the bank. But like many on Wall Street in recent years, Pandit he seemed to foreclose the possibility of running one of Wall Street’s more venerable banks in favor of striking out on his own. Pandit, who had run Morgan Stanley’s institutional investment business, joined with John Havens, another Morgan Stanley big-wig, to form a hedge fund they called Old Lane.

But apparently the exit ramp to hedge fund land does not run one way off Wall Street. This morning the Wall Street Journal reported that Citigroup might pay as much as $600 million for Old Lane in an effort to hire Pandit. Citigroup’s alternative investment group has been without a leader for the last year. The move is also seen as an attempt by Citigroup Chief Executive Chuck Prince to expand the roster of senior executives within the banking giant who might succeed him in the top role.

It's not clear exactly how much of that $600 million Pandit will pocket if Citigroup goes ahead with the acquisition. But one things for certain, this guy is getting one helluva signing bonus.

To Get a Top Street Player, Citi Looks to Buy His Firm [Wall Street Journal]