E*Trade Financial is getting a $2.55 billion cash infusion from Citadel Investment, a move aimed at restoring confidence and liquidity in the discount brokerage.
Citadel will make a two-part investment in E*Trade.
The first component is the purchase of E*Trade's entire $3 billion portfolio of asset-backed securities for a value of around $800 million. (Twenty-six cents on the dollar.)
The second component is the purchase of $1.75 billion worth of 10-year notes, paying an annual interest rate of about 12.5%.
After regulatory approvals, Citadel is expected to own almost 20% of E*Trade.
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