Figure 1 below provides information on the loan portfolio transaction between Citigroup and Blackstone. 75% of the portfolio was comprised of senior secured debt holding first-lien claim on borrowers fixed and intangible assets. The remaining 25% comprised of unsecured bonds. On average, the loans in the portfolio were rated B"/"B-". a Why did Citigroup sell the portfolio of leveraged loans? (5 points) b. Based on the information in Figure 1, from Citigroup's perspective, how did the new loan to Blackstone become much safer than the original leveraged loan portfolio after the deal? (Hint: apply the economics of asset securitization) (9 points) c. Please briefly discuss the moral hazard and adverse selection problems that could arise once banks have access to securitization. (6 points) Figure 1. Transaction Structure LIBOR + 309 bps $6.11 billion (face value) Citigroup Buyers (Blackstone and TPG) Debt: $3.81 billion Equity: $1.26 billion Transaction value: $5.07 LIBOR + 100 bps Margin calls Figure 1 below provides information on the loan portfolio transaction between Citigroup and Blackstone. 75% of the portfolio was comprised of senior secured debt holding first-lien claim on borrowers fixed and intangible assets. The remaining 25% comprised of unsecured bonds. On average, the loans in the portfolio were rated B"/"B-". a Why did Citigroup sell the portfolio of leveraged loans? (5 points) b. Based on the information in Figure 1, from Citigroup's perspective, how did the new loan to Blackstone become much safer than the original leveraged loan portfolio after the deal? (Hint: apply the economics of asset securitization) (9 points) c. Please briefly discuss the moral hazard and adverse selection problems that could arise once banks have access to securitization. (6 points) Figure 1. Transaction Structure LIBOR + 309 bps $6.11 billion (face value) Citigroup Buyers (Blackstone and TPG) Debt: $3.81 billion Equity: $1.26 billion Transaction value: $5.07 LIBOR + 100 bps Margin calls