Former Citi CFO Thomson eyes $2 billion LBO fund

By Michael Flaherty

NEW YORK (Reuters) - Todd Thomson, the former CFO and head of wealth management at Citigroup (C.N), told Reuters on Tuesday he may raise a private equity fund of $1 billion to $2 billion to invest in the financial services sector.

Thomson's new firm, Headwaters Capital LLC, currently shares office space in New York City's Rockefeller Plaza with Ripplewood Holdings, a well known private equity firm that is also expected to be raising a new fund.

Thomson launched Headwaters earlier this year, after an abrupt and controversial departure from Citigroup in January. He said the firm is in its very early phases, investing his own capital with only a handful of employees.

But Thomson said at the Reuters Finance Summit that he may go to outside investors next year to raise a $1 billion to $2 billion private equity fund focused on financial services.

"There might be some interesting things that come out of detritus of the mortgage meltdown," he said, referring to investment opportunities. Thomson thinks prices on mortgage-related assets are headed lower.

"What would be interesting is to buy, for the right price, some of the (mortgage) servicers," he said.

In addition to mortgage-related companies, Thomson said he would consider investments across the financial services sector.

"In raising money today, you need a real story," he said. The current status of the credit markets makes it tough to get financing for private equity deals, he said.

He expects banks will soon return to lending, and there will be a lot of assets on the market in the near term whose prices have been beaten down.

"I believe that the credit markets will open up in the middle to the end of the first quarter," Thomson said.

As for what lessons from Citigroup he took with him to his new venture, Thomson said the key is to hire the right people.

"I don't think I've had a problem working with people who are really good. That was lesson No. 1," he said.

From 2004 through 2006, Thomson was chairman and chief executive officer of Citigroup Global Wealth Management. From 2000 through 2004, he was chief financial officer and head of operations, technology and strategy at Citigroup.

Prior to joining Citigroup in 1998, he held senior positions at GE Capital, Barents Group and Bain & Co.

(For summit blog: summitnotebook.reuters.com/)