Nov. 6 (Bloomberg) -- Citigroup Inc. named Richard Stuckey to manage most of its $43 billion of subprime mortgage assets, choosing the same executive who helped unwind Long-Term Capital Management LP's bad bets nine years ago.

Stuckey, 51, will run the Sub-Prime Portfolio Group, created after the largest U.S. bank by assets said Nov. 4 that it will write down as much as $11 billion of subprime debt and Chief Executive Officer Charles O. ``Chuck'' Prince III resigned. Stuckey, who has been with the company since 1983, will oversee most of the bank's securities linked to homeowners with poor credit, according to a memo to employees.

Rescuing the bank's subprime holdings may be a harder challenge than Long-Term Capital, said Lawrence White, professor of economics at New York University's Stern School of Business. New York-based Citigroup owns subprime mortgage securities that rarely trade and are hard to value. The Long-Term Capital hedge fund was holding derivatives tied to interest rates and equities that readily trade.

``The opaqueness as well as the stinkiness are greater,'' White said.

The shares fell 70 cents to $35.20 at 10:33 a.m. in New York Stock Exchange composite trading, after declining 4.9 percent yesterday. The stock had dropped more than 35 percent this year before today. Only National City Corp. and Washington Mutual Inc. had posted bigger losses of the 24 companies in the KBW Banks Index.

Emergency Funding

Citigroup said yesterday in a filing with the U.S. Securities and Exchange Commission that the amount of assets it held that were difficult to value rose 42 percent in the third quarter. The company's Level 3 assets climbed to $135 billion at the end of September from $95 billion at the end of June, according to SEC filings.

``The company still faces credit deterioration in both the international and domestic consumer businesses,'' said Bank of America Corp. analyst John McDonald in a note to clients today. He cut his rating on Citigroup to ``neutral'' from ``buy.''

Citigroup provided its seven structured investment vehicles with $7.6 billion of emergency financing when they struggled to repay maturing debt through Oct. 31, and bought $3.3 billion of their paper last quarter. The SIVs drew the back-up funding from $10 billion of so-called committed liquidity they buy from Citigroup ``at arm's-length commercial terms,'' the company said in yesterday's filing. Citigroup's SIVs hold ``virtually no subprime securities,'' Chief Financial Officer Gary Crittenden said on a conference call with analysts yesterday.

Stuckey's Team

Credit-default swaps tied to Citigroup, used to speculate on the bank's ability to repay its debt, are trading at the highest level in at least five years, suggesting investor confidence is eroding.

Stuckey, called Rick by his colleagues, is former head of fixed income risk management at Citigroup and currently oversees finance, G-10 risk treasury and relative value. Citigroup spokesman Dan Noonan confirmed the contents of the memo though declined to make Stuckey available for an interview.

Mark Tsesarsky, the 45-year-old head of special situations, securitization at Citigroup, will help Stuckey set up the group's risk management strategy, according to the memo. The team will also draw on ``other expertise'' from the company's structured credit, securitized markets and independent risk management teams.

Writedowns

Citigroup said Nov. 4 that it will write down the value of subprime mortgages and collateralized debt obligations, which are securities backed by bonds and loans, by $8 billion to $11 billion. That may cut fourth-quarter net income by $5 billion to $7 billion, the company estimated, based on current market prices. Citigroup said yesterday third-quarter profit was $2.21 billion, less than the $2.38 billion the company reported last month.

Citigroup said it held $55 billion of subprime-linked debt on Sept. 30, which may be written down to about $43 billion. The $55 billion includes $43 billion of CDOs that mainly own subprime mortgage bonds. The CDOs' value is based on assumptions that include the future of housing prices, Citigroup said in its Nov. 4 statement.

Citigroup's losses and the departure of Prince came after New York-based Merrill Lynch & Co., the world's biggest brokerage, said its writedowns exceeded $8 billion, prompting last week's ouster of CEO Stan O'Neal.

`The Woods'

Subprime mortgage securities have tumbled in value as defaults for such loans in securities rose to the highest on record. Citigroup's losses accumulated as the value of some CDOs was wiped out.

``We are far from being out of the woods yet,'' said Peter Plaut, an analyst at New York-based hedge fund manager Sanno Point Capital Management LLC. ``Every time we come into the office for a new week, there's another shoe to drop.''

Credit-default swaps tied to Citigroup's bonds are trading at the widest level since at least September 2002, data from Credit Suisse Group show. Contracts tied to Merrill have soared to the highest in at least six years, and contracts on Goldman Sachs Group Inc., the world's most profitable securities firm, and Bear Stearns Cos., the firm that reported a 61 percent profit decline for the third quarter, are approaching record highs reached in August.

The swap contracts can be used to hedge against losses. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

Salomon Brothers

Stuckey worked at Salomon Brothers Inc. when Long-Term Capital founder John Meriwether was a vice chairman. From 1991 to 1993, he was co-head of Salomon's derivatives unit with Myron Scholes, the Nobel Prize-winning Stanford University professor who was a partner in Long-Term Capital. Scholes didn't respond to an e-mail seeking comment.

In 1998, Stuckey joined the team that managed the unwinding of Long-Term Capital's assets after the hedge fund suffered $4.6 billion of losses. The group was created by the 14 firms that took over the fund so its liquidation wouldn't further roil markets by dumping $90 billion of assets. The firms, as lenders, needed to avoid a fire sale to maximize the value of their collateral.

Another of the LTCM team, Brian Leach, left Morgan Stanley in 2005 to join Vikram Pandit and other executives founding Old Lane Partners LP, a hedge fund firm Citigroup bought for $800 million earlier this year. Pandit was promoted last month to oversee trading, investment banking and alternative investments, after trading chief Thomas Maheras left.

Other managers of the LTCM clean-up were David Rogers of Goldman; Conrad Voldstad, of Merrill; Michael Allen of UBS AG and John Fullerton of JPMorgan Chase & Co.

Voldstad, now at New Jersey-based Arlington Hill Investment Management LLC, which runs a bond hedge fund, described Stuckey in an e-mail as ``a good, solid professional.''

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

Last Updated: November 6, 2007 10:35 EST