In a move said to be an attempt to protect a controversial investment made this summer, a private equity fund partially owned by Citigroup will expand its stake in ailing subprime lender IMC Mortgage to 95% and extend an estimated $1.5 billion in credit to the company.

The private equity fund, Greenwich Street Capital Partners, is owned partially by Travelers Investment Group and run by Mark Weill, son of Citigroup co-chairman Sandy Weill. It has already invested more than $50 million in IMC, one of the largest lenders to homeowners with poor credit.

The most recent agreement, announced Monday by IMC of Tampa, will bring the fund's investment in the subprime company to about $77 million. In addition, Greenwich extended a $33 million loan to IMC in October.

Citigroup has a significant presence in subprime mortgage lending through its wholly owned retail subsidiary, Commercial Credit, Travelers' Baltimore-based home equity lender.

Though Greenwich Street is "co-sponsored by Citigroup," its investments in IMC Mortgage are not indicative of Citigroup's overall strategy, a Travelers spokeswoman said.

This week's deal will give IMC enough capital and credit to pay off its existing bank loans and credit facilities, according to a statement by IMC.

IMC's credit facilities include $2.25 billion in warehouse lines from PaineWebber Inc., Bear, Stearns & Co., and German American Capital Corp., a subsidiary of Deutsche Bank North America, according to the company's third-quarter earnings statement. In addition, IMC had a $92.5 million loan outstanding from BankBoston as of Sept. 30, the third-quarter report said.

Voice mail at IMC's investor relations department said that the company was "not going to comment further."

Reaction to the deal was mixed, with some predicting that IMC will be given support by Travelers to continue as a viable business and others speculating that Greenwich would liquidate IMC's assets to recoup its investment and the $33 million loan it granted in October to help IMC meet margin calls.

Travelers and Greenwich Street said in July that they were investing $50 million in IMC and had an option to buy another $30 million of company stock. The move sent the company's stock up more than 35%, to trade as high as $13.75 in late July.

Travelers recognized the "tremendous potential" in IMC, Robert Geitz, senior vice president of Travelers Investment Group Inc., said in announcing the deal.

Analysts were baffled at the time by the deal, in part because Travelers already owned a top-20 subprime lender and also because the future of the subprime field was cloudy.

Since then, subprime lenders have suffered from plummeting demand for securities backed by their loans and from the capital market's retreat to lower-risk assets. In October IMC said it was taking a $40 million loss on unsuccessful hedges to its mortgage portfolio and was looking for a buyer.

IMC's existing common shareholders will be left with 5% of the company's outstanding equity after the deal closes and will not get any payment, IMC said.

IMC shares were trading at less than a dollar on Tuesday.

The home equity company is "giving away the ship," said one former limited partner. "They don't have the cash reserves, so they said goodbye to the stockholders."

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