Citigroup (NYSE: C) Attempting to Sell $3 Billion in Car Loans

According to a new FT Report, Citigroup is in talks with private equity groups and hedge funds to sell $3 billion worth of car loans as part of its ongoing efforts to slim-down and eliminate billions of dollars in troubled assets from its balance sheets.

Citigroup may have a difficult time finding a buyer, however. The securities market has failed to recover from the recession, complicating efforts by AIG, Citigroup and others to sell unwanted assets to shore-up their balance sheets.

Citi is hoping to make the loans look more attractive by reportedly having offered to provide the buyers of the loans with financing for a few years after the sale. Bankers told FT that the initial response from bidders was encouraging.

Some of Citigroup’s consumer loans have already been securitized under the Federal Reserve’s term asset-backed securities loan facility (TALF), a program designed to shore-up the securitization market.

Unfortunately, many private equity groups and hedge funds said the assets are not as attractive because of the lack of a thriving market for securitized bonds that are backed by cash flow from loans. Potential buyers will also have to worry about how to finance the loans once Citigroup’s credit facility expires, since there is not a strong and fully functioning securitization market.