Citigroup Announces New $1,000 Preferred Stock Offering

Citigroup is getting into the preferred stock issuance parade with the announcement of a new fixed to floating rate $1,000 preferred.

Not much is know as of yet, except we know it will be non-cumulative and qualified and will have a early redemption date in 2024.

The preliminary prospectus can be read here.

Could the company redeem outstanding issues? The outstanding issues are here.

16 thoughts on “Citigroup Announces New $1,000 Preferred Stock Offering”

  1. The Citigroup Capital XIII, 7.875% Fixed/Floating TruPS Trust Preferred Securities (C-N) would seem to be a likely candidate for redemption. Its callable and trading well over par in the mid-27s.

      1. Many a man has had his heart broke there shorting C-N. Wouldnt own it either though. I warned several people a few years ago on SA a few years ago dont do it….They did, a trail of tears as it went up. The CEO has been on record in past defending having outstanding but would give no reasons. That has been a couple years ago and things do change, so who knows.

        1. Yes Grid–I know–it has been a good holding for folks–til now. Having this outstanding at current rates is getting harder and harder to justify.

          I see it is off just 1/8th today so no one is thinking call.

    1. Without knowing the monetary size of the new offering its hard to tell. There are roughly 90 million C-N shares outstanding, so Citigroup would need at least 20 million new shares to do a full redemption. The prelim talks about using the funds for hedging strategies, so who knows.

    2. I think the reason they have never called it is because it has the ability to defer payments without defaulting.
      Those provisions are very rare nowadays, and would be exercised in a break-glass situation and that if they wanted to redeem something, it would be an issue without the deferral provision.

      1. Justin that probably isnt a reason. First they cannot issue trust debt anymore for Tier 1 cap purposes. This is a grandfathered TARP era issue. They would have replace with a non cumulative preferred. And of course they can be suspended without repayment for any dividend missed. In fact your very reason is exactly why Feds banned use of these instruments anymore. They dont want the accrued liability on the books owed to someone if a bank needed a bailout or someone willing to take it over if in trouble.
        The key instrument of this from a banks perspective is the tax deductibility of the issue at state and federal level being it is debt. Preferreds are capital and are paid from after tax money.
        That being said it is still a mystery as to why it hasnt been redeemed as management never was forthcoming when asked.

        1. Grid – I read your comment above. Do you think the tier 1 grandfather bit is sufficient to make this call proof?

          Citi is paying a tremendous premium on 2.2 billion $ worth of debt. It’s a hell of a price to pay for the privilege.

          Nothing in the red herring in use of proceeds that suggests redemption of the N, but that guarantees bupkis.

          I don’t believe they intend a retail listing for the new issue.

          1. Bob, mathematically it doesnt make sense. Before Trump business tax cut it did. But not now. Its basically now adjusted for tax break is still a bit over 6%. And we know they could issue something lower than that now.
            Even if its embedded in capital plan locked in with Feds, I am sure they would give permission to redeem and reissue a capital stock preferred. I remember a few years ago people were dogging him on a conference call about it and why isnt it being redeemed. And he stated they would not near term. But he was evasive with no real answer they wanted.
            Maybe him and his peeps on Board love that safe income quarterly payments deposited in their accounts, lol… The irony is being its 2040 maturity, each passing year it becomes “higher interest, shorter duration debt”. Which makes no sense to have since perpetual yields are so outrageously low now. One would think its on life support now, but its been alive on a respirator for years now.

    3. The US preferred stock market is a broken marketplace right now. The high coupon Citibank preferreds are still not dropping much in price. I am not talking about shorting an issue. Who would be holding issues like this in the 27 dollar range with this announcement? I just don’t believe everybody is sleeping. Something else is happening in this entire marketplace

  2. Oh goodie – this to be the first f/f issue using a substitute for LIBOR??? “Secured Overnight Financing Rate” = SOFR and it only takes a couple of pages to describe how it’s going to be calculated….

    1. Where’s the SEC on a bold job on LIBOR??
      Had gotten out of both C positions about two months ago, we wiil see. C_N looks doomed.
      Otherwise, staying under call prot has been a good idea.
      Seems that rolling out of SR-A to move into the new COFOL issue just now is a a rating downgrade and a short term cap gain capture. Really, not the best income account management. So…I get credit card spreads to rely on instead of utility accounts.
      Why did I just here the notes of JAWS?

    2. I have been surprised that issues have continued to come out using LIBOR. We know it’s going away so it is strange to me that it continued to be used.

      I don’t understand why the 3-month tbills could not be used in place of LIBOR. It’s market based, hard to manipulate and seems more problem free than the nutty SOFR.

    1. If Citi is issuing at 5%, isn’t WFC-L at 5.25% a buy in comparison? Plus WFC-L is uncallable, so zero call risk ever. That feature alone is worth an extra 15-25 bps.

    2. I believe COFOL also priced at 5%. So two 5% preferreds from big banks today if both Citi and COF are 5%ers.

Leave a Reply

Your email address will not be published. Required fields are marked *