The information in this preliminary pricing supplement is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. This preliminary pricing supplement and the accompanying product supplement, prospectus supplement and prospectus are not an offer to sell these securities, nor are they soliciting an offer to buy these securities, in any state where the offer or sale is not permitted.
|
||
Citigroup Inc.
|
SUBJECT TO COMPLETION, DATED MAY 4, 2015
|
May , 2015
Medium-Term Senior Notes, Series G
Pricing Supplement No. 2015–CMTNG0534
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-192302
|
|
§
|
The notes offered by this pricing supplement are unsecured debt securities issued by Citigroup Inc. As further described below, the notes will bear interest (i) in Year 1: at a rate of 10.00% per annum and (ii) in Years 2 to maturity: subject to our redemption right, at a floating rate based on the modified CMS reference index, subject to the maximum interest rate specified below and the minimum interest rate of 0.00% per annum. The CMS reference index is the 30-year constant maturity swap rate (“CMS30”) minus the 2-year constant maturity swap rate (“CMS2”) and will be reset quarterly. The modified CMS reference index is the CMS reference index minus 0.875%. The notes offer an above-market fixed interest rate in the first year. Thereafter, however, interest payments on the notes will vary based on fluctuations in the modified CMS reference index and may be as low as 0%.
|
|
§
|
We may call the notes for mandatory redemption on any interest payment date beginning one year after issuance.
|
|
§
|
Investors in the notes must be willing to accept (i) an investment that may have limited or no liquidity and (ii) the risk of not receiving any amount due under the notes if we default on our obligations. All payments on the notes are subject to the credit risk of Citigroup Inc.
|
KEY TERMS
|
|||
Aggregate stated principal amount:
|
$
|
||
Stated principal amount:
|
$1,000 per note
|
||
Pricing date:
|
May , 2015 (expected to be May 22, 2015)
|
||
Issue date:
|
May , 2015 (three business days after the pricing date)
|
||
Maturity date:
|
Unless earlier called by us, May , 2035 (expected to be May 28, 2035)
|
||
Payment at maturity:
|
At maturity, unless we have earlier called the notes, you will receive for each note you then hold an amount in cash equal to $1,000 plus any accrued and unpaid interest
|
||
Interest:
|
§ During each interest period from and including the issue date to but excluding May , 2016 (expected to be May 28, 2016), the notes will bear interest at a fixed rate of 10.00% per annum
§ During each interest period commencing on or after May , 2016 (expected to be May 28, 2016), the notes will bear interest at a floating rate equal to 10 times the modified CMS reference index, as determined on the CMS reference determination date for that interest period, subject to a maximum interest rate of 10.00% per annum and a minimum interest rate of 0.00% per annum
After the first year of the term of the notes, interest payments will vary based on fluctuations in the modified CMS reference index. After the first year, the notes may pay a below-market rate or no interest at all for an extended period of time, or even throughout the entire remaining term.
|
||
CMS reference index:
|
On any CMS reference determination date, CMS30 minus CMS2, each as determined on that CMS reference determination date
|
||
Modified CMS reference index:
|
The CMS reference index minus 0.875%
|
||
CMS reference determination date:
|
For any interest period commencing on or after May , 2016 (expected to be May 28, 2016), the second U.S. government securities business day prior to the first day of that interest period
|
||
Interest period:
|
Each three-month period from and including an interest payment date (or the issue date, in the case of the first interest period) to but excluding the next interest payment date
|
||
Interest payment dates:
|
The day of each February, May, August and November (expected to be the 28th day of each February, May, August and November), beginning on August , 2015 (expected to be August 28, 2015) and ending on the maturity date or, if applicable, the date when the notes are redeemed
|
||
Day count convention:
|
During each interest period, interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The amount of each interest payment, if any, will equal (i) the stated principal amount of the notes multiplied by the interest rate in effect during the applicable interest period divided by (ii) 4
|
||
Call right:
|
We may call the notes, in whole and not in part, for mandatory redemption on any interest payment date beginning on May , 2016 (expected to be May 28, 2016), upon not less than five business days’ notice. Following an exercise of our call right, you will receive for each note you then hold an amount in cash equal to $1,000 plus any accrued and unpaid interest.
|
||
Listing:
|
The notes will not be listed on any securities exchange
|
||
CUSIP / ISIN:
|
17298CAR9 / US17298CAR97
|
||
Underwriter:
|
Citigroup Global Markets Inc. (“CGMI”), an affiliate of the issuer, acting as principal
|
||
Underwriting fee and issue price:
|
Issue price(1)(2)
|
Underwriting fee(3)(4)
|
Proceeds to issuer(4)
|
Per note:
|
$1,000
|
$40
|
$960
|
Total:
|
$
|
$
|
$
|
Citigroup Inc.
|
Fixed to Floating Rate Notes Due May , 2035
Leveraged Callable CMS Curve Linked Notes
|
|
§
|
Stated principal amount: $1,000
|
|
§
|
Maximum interest rate: 10.00% per annum
|
Hypothetical CMS Reference Index(1)
|
Hypothetical Interest Rate per Annum(2)
|
Hypothetical Quarterly Interest Payment per Note(3)
|
-1.000%
|
0.00%
|
$0.00
|
-0.800%
|
0.00%
|
$0.00
|
-0.600%
|
0.00%
|
$0.00
|
-0.400%
|
0.00%
|
$0.00
|
-0.200%
|
0.00%
|
$0.00
|
0.000%
|
0.00%
|
$0.00
|
0.200%
|
0.00%
|
$0.00
|
0.400%
|
0.00%
|
$0.00
|
0.600%
|
0.00%
|
$0.00
|
0.800%
|
0.00%
|
$0.00
|
0.875%
|
0.00%
|
$0.00
|
1.000%
|
1.25%
|
$3.13
|
1.200%
|
3.25%
|
$8.13
|
1.400%
|
5.25%
|
$13.13
|
1.600%
|
7.25%
|
$18.13
|
1.800%
|
9.25%
|
$23.13
|
1.875%
|
10.00%
|
$25.00
|
2.000%
|
10.00%
|
$25.00
|
2.200%
|
10.00%
|
$25.00
|
2.400%
|
10.00%
|
$25.00
|
May 2015
|
PS-2
|
Citigroup Inc.
|
Fixed to Floating Rate Notes Due May , 2035
Leveraged Callable CMS Curve Linked Notes
|
After the first year, the notes will pay interest at a floating rate that may be as low as 0% on one or more interest payment dates. The floating interest payments on the notes will vary based on fluctuations in the modified CMS reference index. If the modified CMS reference index narrows, interest payments on the notes will be reduced, and if the modified CMS reference index is 0% for any interest period, the notes will pay no interest at all for that interest period. The CMS reference index is influenced by many complex economic factors and is impossible to predict. After the first year, it is possible that the notes will pay a below-market rate or no interest at all for an extended period of time, or even throughout the entire remaining term of the notes. Although the notes provide for the repayment of the stated principal amount at maturity, you may nevertheless suffer a loss on your investment in the notes, in real value terms, if you receive below-market or no interest payments after the first year of the term of the notes.
|
§
|
The notes may pay below-market or no interest if short-term interest rates rise. Although there is no single factor that determines the spread between two constant maturity swap rates, the spread has historically tended to fall when short-term interest rates rise. Short-term interest rates have historically been highly sensitive to the monetary policy of the Federal Reserve Board. Accordingly, one significant risk assumed by investors in the notes is that the Federal Reserve Board may pursue a policy of raising short-term interest rates, which, if historical patterns hold, would lead to a decrease in the CMS reference index. In that event, the floating rate payable on the notes may decline significantly, possibly to 0%. It is important to understand, however, that short-term interest rates are affected by many factors and may increase even in the absence of a Federal Reserve Board policy to increase short-term interest rates. Furthermore, it is important to understand that the CMS reference index may decrease even in the absence of an increase in short-term interest rates because it, too, is influenced by many complex factors. See “About Constant Maturity Swap Rates” in the accompanying product supplement.
|
§
|
The floating interest rate on the notes may be lower than other market interest rates. The floating interest rate on the notes will not necessarily move in line with general U.S. market interest rates or even CMS rates and, in fact, may move inversely with general U.S. market interest rates, as described in the preceding risk factor. For example, if there is a general increase in CMS rates but shorter-term rates rise more than longer-term rates, the CMS reference index will decrease, as will the floating rate payable on the notes. Accordingly, the notes are not appropriate for investors who seek floating interest payments based on general market interest rates.
|
§
|
The interest rate on the notes is subject to a cap. As a result, the notes may pay interest at a lower rate than an alternative instrument that is not so capped.
|
§
|
The CMS reference index applicable to any interest period will be reduced by 0.875%. When determining the floating interest rate payable after the first year, 0.875% will be deducted from the level of the CMS reference index on the relevant CMS reference determination date to determine the modified CMS reference index. Because the modified CMS reference index is multiplied by 10 in order to determine the floating interest rate (subject to the maximum interest rate), the 0.875% deduction from the CMS reference index reduces the floating interest rate by a full 8.750%. As a result, the interest payable on your notes will be less than that which would be payable without the 0.875% deduction.
|
§
|
The notes may be called for mandatory redemption at our option beginning one year after issuance, which will limit your potential to benefit from favorable CMS reference index performance. If we call the notes, we will do so at a time that is advantageous to us and without regard to your interests. We are more likely to call the notes at a time when the CMS reference index is performing favorably from your perspective and we expect it to continue to do so. Accordingly, our call right may limit your potential to receive above-market interest payments. Conversely, when the CMS reference index is performing unfavorably from your perspective or when we expect it to do so in the future, we are less likely to call the notes, so that you may continue to hold notes paying below-market or no interest for an extended period of time. If we call the notes, you may have to reinvest the proceeds in a lower interest rate environment.
|
§
|
The notes are subject to the credit risk of Citigroup Inc. If we default on our obligations under the notes, you may not receive anything owed to you under the notes.
|
§
|
Secondary market sales of the notes may result in a loss of principal. You will be entitled to receive at least the full stated principal amount of your notes, subject to the credit risk of Citigroup Inc., only if you hold the notes to maturity or until the date
|
May 2015
|
PS-3
|
Citigroup Inc.
|
Fixed to Floating Rate Notes Due May , 2035
Leveraged Callable CMS Curve Linked Notes
|
|
when the notes are redeemed. The value of the notes may fluctuate, and if you sell your notes in the secondary market prior to maturity or the date when the notes are redeemed, you may receive less than your initial investment.
|
§
|
The notes are riskier than notes with a shorter term. The notes are relatively long-dated, subject to our call right. Because the notes are relatively long-dated, many of the risks of the notes are heightened as compared to notes with a shorter term, because you will be subject to those risks for a longer period of time. In addition, the value of a longer-dated note is typically less than the value of an otherwise comparable note with a shorter term.
|
The notes will not be listed on a securities exchange and you may not be able to sell them prior to maturity. The notes will not be listed on any securities exchange. Therefore, there may be little or no secondary market for the notes. CGMI currently intends to make a secondary market in relation to the notes and to provide an indicative bid price for the notes on a daily basis. Any indicative bid price for the notes provided by CGMI will be determined in CGMI’s sole discretion, taking into account prevailing market conditions and other relevant factors, and will not be a representation by CGMI that the notes can be sold at that price, or at all. CGMI may suspend or terminate making a market and providing indicative bid prices without notice, at any time and for any reason. If CGMI suspends or terminates making a market, there may be no secondary market at all for the notes because it is likely that CGMI will be the only broker-dealer that is willing to buy your notes prior to maturity. Accordingly, an investor must be prepared to hold the notes until maturity.
|
§
|
The difference between CMS30 and CMS2 may not be as great as the difference between CMS30 and a CMS rate with a shorter maturity. The floating interest payments on the notes may be less than they would be if the notes were linked to the spread between CMS30 and a CMS rate with a shorter maturity than 2 years.
|
§
|
The estimated value of the notes on the pricing date, based on CGMI’s proprietary pricing models and our internal funding rate, will be less than the issue price. The difference is attributable to certain costs associated with selling, structuring and hedging the notes that are included in the issue price. These costs include (i) the selling concessions paid in connection with the offering of the notes, (ii) hedging and other costs incurred by us and our affiliates in connection with the offering of the notes and (iii) the expected profit (which may be more or less than actual profit) to CGMI or other of our affiliates in connection with hedging our obligations under the notes. These costs adversely affect the economic terms of the notes because, if they were lower, the economic terms of the notes would be more favorable to you. The economic terms of the notes are also likely to be adversely affected by the use of our internal funding rate, rather than our secondary market rate, to price the notes. See “The estimated value of the notes would be lower if it were calculated based on our secondary market rate” below.
|
§
|
The estimated value of the notes was determined for us by our affiliate using proprietary pricing models. CGMI derived the estimated value disclosed on the cover page of this pricing supplement from its proprietary pricing models. In doing so, it may have made discretionary judgments about the inputs to its models, such as the volatility of the CMS reference index and interest rates. CGMI’s views on these inputs and assumptions may differ from your or others’ views, and as an underwriter in this offering, CGMI’s interests may conflict with yours. Both the models and the inputs to the models may prove to be wrong and therefore not an accurate reflection of the value of the notes. Moreover, the estimated value of the notes set forth on the cover page of this pricing supplement may differ from the value that we or our affiliates may determine for the notes for other purposes, including for accounting purposes. You should not invest in the notes because of the estimated value of the notes. Instead, you should be willing to hold the notes to maturity irrespective of the initial estimated value.
|
§
|
The estimated value of the notes would be lower if it were calculated based on our secondary market rate. The estimated value of the notes included in this pricing supplement is calculated based on our internal funding rate, which is the rate at which we are willing to borrow funds through the issuance of the notes. Our internal funding rate is generally lower than the market rate implied by traded instruments referencing our debt obligations in the secondary market for those debt obligations, which we refer to as our secondary market rate. If the estimated value included in this pricing supplement were based on our secondary market rate, rather than our internal funding rate, it would likely be lower. We determine our internal funding rate based on factors such as the costs associated with the notes, which are generally higher than the costs associated with conventional debt securities, and our liquidity needs and preferences. Our internal funding rate is not the same as the interest that is payable on the notes.
|
§
|
The estimated value of the notes is not an indication of the price, if any, at which CGMI or any other person may be willing to buy the notes from you in the secondary market. Any such secondary market price will fluctuate over the term of the notes based on the market and other factors described in the next risk factor. Moreover, unlike the estimated value included in this pricing supplement, any value of the notes determined for purposes of a secondary market transaction will be based on our secondary market rate, which will likely result in a lower value for the notes than if our internal funding rate were used. In addition, any secondary market price for the notes will be reduced by a bid-ask spread, which may vary depending on the aggregate stated principal amount of the notes to be purchased in the secondary market transaction, and the expected cost of unwinding related hedging transactions. As a result, it is likely that any secondary market price for the notes will be less than the issue price.
|
§
|
The value of the notes prior to maturity will fluctuate based on many unpredictable factors. The value of your notes prior to maturity will fluctuate based on the level and volatility of the CMS reference index and a number of other factors, including expectations of future levels of CMS30 and CMS2, the level of general market interest rates, the time remaining to maturity and our creditworthiness, as reflected in our secondary market rate. You should understand that the value of your notes at any time prior to maturity may be significantly less than the issue price.
|
May 2015
|
PS-4
|
Citigroup Inc.
|
Fixed to Floating Rate Notes Due May , 2035
Leveraged Callable CMS Curve Linked Notes
|
§
|
Immediately following issuance, any secondary market bid price provided by CGMI, and the value that will be indicated on any brokerage account statements prepared by CGMI or its affiliates, will reflect a temporary upward adjustment. The amount of this temporary upward adjustment will steadily decline to zero over the temporary adjustment period. See “Valuation of the Notes” in this pricing supplement.
|
§
|
Our offering of the notes does not constitute a recommendation to invest in an instrument linked to the CMS reference index. You should not take our offering of the notes as an expression of our views about how the CMS reference index will perform in the future or as a recommendation to invest in any instrument linked to the CMS reference index, including the notes. As we are part of a global financial institution, our affiliates may, and often do, have positions (including short positions), and may publish research or express opinions, that in each case conflict with an investment in the notes. You should undertake an independent determination of whether an investment in the notes is suitable for you in light of your specific investment objectives, risk tolerance and financial resources.
|
§
|
The manner in which CMS rates are calculated may change in the future. The method by which CMS30 and CMS2 are calculated may change in the future, as a result of governmental actions, actions by the publisher of CMS 30 and CMS2 or otherwise. We cannot predict whether the method by which CMS30 or CMS2 is calculated will change or what the impact of any such change might be. Any such change could affect the level of the CMS reference index in a way that has a significant adverse effect on the notes.
|
§
|
One of our affiliates participates in the determination of CMS30 and CMS2. CMS rates are determined based on a poll of dealers in interest rate swaps selected by the International Swaps and Derivatives Association, Inc. One of our affiliates is a participant in the poll that determines CMS rates, and its participation in that poll may have an effect on CMS30 and CMS2. Any such effect on CMS30 and CMS2 may adversely affect holders of the notes. In participating in that poll, our affiliate has no obligation to consider your interests as an investor in the notes.
|
§
|
The calculation agent, which is our affiliate, will make important determinations with respect to the notes. If certain events occur, Citibank, N.A., as calculation agent, will be required to make certain discretionary judgments that could significantly affect one or more payments owed to you under the notes. Such judgments could include, among other things, determining the level of CMS30 or CMS2 if it is not otherwise available on a CMS reference determination date and selecting a successor rate if either CMS30 or CMS2 is discontinued. Any of these determinations made by Citibank, N.A. in its capacity as calculation agent may adversely affect any floating interest payment owed to you under the notes.
|
May 2015
|
PS-5
|
Citigroup Inc.
|
Fixed to Floating Rate Notes Due May , 2035
Leveraged Callable CMS Curve Linked Notes
|
Historical CMS Reference Index Rate (%)
January 3, 2005 to May 1, 2015
|
May 2015
|
PS-6
|
Citigroup Inc.
|
Fixed to Floating Rate Notes Due May , 2035
Leveraged Callable CMS Curve Linked Notes
|
August 28, 2015
|
$
|
August 28, 2020
|
$
|
August 28, 2025
|
$
|
August 28, 2030
|
$
|
November 28, 2015
|
$
|
November 28, 2020
|
$
|
November 28, 2025
|
$
|
November 28, 2030
|
$
|
February 28, 2016
|
$
|
February 28, 2021
|
$
|
February 28, 2026
|
$
|
February 28, 2031
|
$
|
May 28, 2016
|
$
|
May 28, 2021
|
$
|
May 28, 2026
|
$
|
May 28, 2031
|
$
|
August 28, 2016
|
$
|
August 28, 2021
|
$
|
August 28, 2026
|
$
|
August 28, 2031
|
$
|
November 28, 2016
|
$
|
November 28, 2021
|
$
|
November 28, 2026
|
$
|
November 28, 2031
|
$
|
February 28, 2017
|
$
|
February 28, 2022
|
$
|
February 28, 2027
|
$
|
February 28, 2032
|
$
|
May 28, 2017
|
$
|
May 28, 2022
|
$
|
May 28, 2027
|
$
|
May 28, 2032
|
$
|
August 28, 2017
|
$
|
August 28, 2022
|
$
|
August 28, 2027
|
$
|
August 28, 2032
|
$
|
November 28, 2017
|
$
|
November 28, 2022
|
$
|
November 28, 2027
|
$
|
November 28, 2032
|
$
|
February 28, 2018
|
$
|
February 28, 2023
|
$
|
February 28, 2028
|
$
|
February 28, 2033
|
$
|
May 28, 2018
|
$
|
May 28, 2023
|
$
|
May 28, 2028
|
$
|
May 28, 2033
|
$
|
August 28, 2018
|
$
|
August 28, 2023
|
$
|
August 28, 2028
|
$
|
August 28, 2033
|
$
|
November 28, 2018
|
$
|
November 28, 2023
|
$
|
November 28, 2028
|
$
|
November 28, 2033
|
$
|
February 28, 2019
|
$
|
February 28, 2024
|
$
|
February 28, 2029
|
$
|
February 28, 2034
|
$
|
May 28, 2019
|
$
|
May 28, 2024
|
$
|
May 28, 2029
|
$
|
May 28, 2034
|
$
|
August 28, 2019
|
$
|
August 28, 2024
|
$
|
August 28, 2029
|
$
|
August 28, 2034
|
$
|
November 28, 2019
|
$
|
November 28, 2024
|
$
|
November 28, 2029
|
$
|
November 28, 2034
|
$
|
February 28, 2020
|
$
|
February 28, 2025
|
$
|
February 28, 2030
|
$
|
February 28, 2035
|
$
|
May 28, 2020
|
$
|
May 28, 2025
|
$
|
May 28, 2030
|
$
|
May 28, 2035
|
$
|
May 2015
|
PS-7
|
Citigroup Inc.
|
Fixed to Floating Rate Notes Due May , 2035
Leveraged Callable CMS Curve Linked Notes
|
May 2015
|
PS-8
|