Citigroup Inc. (C) announced plans to expand its outstanding notes buyback offer size to $1.195 billion. This reflects an increase of $285 million from the previously announced size of $910 million. This increase in notes buyback comes as part of its recent liability management efforts.
The offer for buyback relates to twelve series of outstanding notes. 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. Also, the prior declared early tender date for notes validly tendered pursuant to the offers has been extended to December 21, 2012, 11:59 p.m., New York City time.
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.
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 nearly $14 billion year to date. This also included the redemption of trust preferred securities. Combined with the continuing natural maturity of long-term debt that requires no refinancing, these measures help the company achieve lower borrowing costs.
Following the failure in the stress test earlier this year, Citi decided against any hike in capital returns in the resubmitted capital plan. Instead, it focused on building its capital levels. For the company that had over $271 billion in long-term debt at the end of September 2012, 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, Bank of America Corp. (BAC) and KeyCorp (KEY) also have a Zacks #3 Rank.
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