Citigroup's stock has been weighed down in recent weeks by investors' worries that the giant bank would need to take drastic steps, like cutting its dividend, to raise capital amid growing credit losses.

Now Citigroup has received a huge boost, a $7.5 billion cash infusion from the Abu Dhabi Investment Authority, the world's largest sovereign wealth fund.

The deal has echoes of the big investment that Prince Walid bin Talal of Saudi Arabia made in Citigroup in the early 1990s. His stake helped buoy shares of the bank, which was then reeling from losses in Latin America and a slump in American real estate.  

Under the terms of the agreement, announced on Monday night, Abu Dhabi is buying convertible securities that can be converted into a 4.9 percent stake in Citigroup in 2010 and 2011 at prices ranging from $31.83 to $37.24 per share. Citigroup shares tumbled 6 percent on Monday, to a five-year low of $29.75.

The convertible securities pay a fixed coupon of 11 percent per year, payable quarterly. That is a higher rate than many corporate junk bonds, but Reuters, citing a person familiar with the matter, says that 60 percent of the coupon is tax-deductible, making the coupon rate similar to the dividend rate on Citigroup's shares.

The deal would make the fund the largest investor in the company, according to several reports, its stake larger than that of Prince Walid.

Citigroup said in its statement that "substantially all of the investment proceeds" will be treated as Tier 1 capital, allowing the bank to achieve targeted capital ratios by the end of the first half of 2008.

"This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business," said Win Bischoff, Citigroup's acting chief executive. "It builds on a series of actions we have taken over the past several months to strengthen our capital base."

The cash infusion comes at a critical time for Citigroup. The bank is searching for a new chief executive to replace Charles Prince, who left as the company disclosed it would have to take an additional write-down of as much as $11 billion largely on investments tied to subprime mortgages. CNBC reported on Monday that the bank is planning another round of sweeping job cuts.

And the deal is the latest show of strength by Persian Gulf investment funds, whose war chests have been overflowing thanks to the steady climb in oil prices. Investors in the Persian Gulf have announced more than $70 billion of foreign acquisitions this year, Reuters says, more than the previous two years combined.

The Abu Dhabi Investment Authority has made other investments in finance. Earlier this year, it acquired a stake of less than 10 percent in the private equity firm Apollo Management. A smaller Abu Dhabi fund recently announced that it was taking an 8.1 percent stake in the chipmaker Advance Micro Devices.

"We see in Citi a highly respected company with a premier brand and with tremendous opportunities for growth," said Sheik Ahmed bin Zayed Al Nahayan, the managing director of the Abu Dhabi Investment Authority. "This investment reflects our confidence in Citi's potential to build shareholder value."