Citigroup Inc. (C) announced offers to buy twelve series of outstanding notes. This move comes as part of its recent liability management efforts. As of November 21, 2012, the notes have a total principal amount outstanding of around $18.4 billion.
Currently, Citi’s offers reach an aggregate of $910 million. It includes offers for notes on a fixed spread basis as well as a fixed-price basis. The maturity dates of these notes range between 2013 and 2016. On December 19, 2012, the offers will expire at 11:59 p.m., New York City time, unless extended or terminated earlier.
As a matter of fact, with a decent liquidity position, Citi has opted for measures to manage its liability efficiently. Notably, excluding these offers, Citi has lowered its outstanding long-term debt by about $13.9 billion year-to-date. This also included its redemption of trust preferred securities. Combined with the continuing natural maturing of long-term debt that requires no refinancing, these measures help the company in achieving lower borrowing costs.
Further, based on factors such as economic value, possible impact on Citi’s net interest margin and borrowing costs as well as the overall residual tenor of its debt portfolio, the company will seek buyback prospects for its long-term as well as short-term debt.
After failing the stress test earlier this year, Citi decided against any capital returns in the resubmitted capital plan and instead focused on building up its capital levels. Its efforts to reduce borrowing costs and lower debt levels are encouraging. We believe such measures will finally aid in improving its overall profitability.
Citi currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering its fundamentals, we also have a long-term Neutral recommendation on the stock. Among its peers, JPMorgan Chase & Co. (JPM) and KeyCorp (KEY) have a Zacks #2 Rank, which translates into a short-term Buy rating.
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