Citigroup (NYSE:C) Enters Second Round with OneMain

OneMain, the subprime consumer lending unit of Citigroup's (NYSE:C) CitiFinancial unit, has entered into the second round of the auction process, according to sources close to the matter.

Sources said one of the first companies that is headed to the next round is Blackstone Group. About a dozen companies were looking at OneMain in the first round of the auction.

Even so, OneMain has its work cut out for it in attempting to sell companies on the viability of investing in subprime lending at a time when the majority of banks have exited it. It also must convince potential suitors that subprime is a growth segment going forward.

With businesses in the consumer lending segment being backed by the FDIC, the deal for OneMain would have to be an investment-grade leveraged buyout.

In a move to keep confidential data from being released into the market, stories have circulated that Citigroup would provide staple financing for the deal. According to sources, there hasn't been a decision made concerning that issue one way or the other.

Citigroup closed Friday at $4.91, dropping $0.03, or 0.61 percent.