Citigroup finally made the move to sell its first US dollar holding company bond deal of the year on Wednesday, following in the wake of a recent upgrade from Moody’s.
The US bank raised US$2.5bn from the 11 non-call 10-year self-led issue, and was able to pull in pricing to 137.5bp over Treasuries from initial price thoughts of the high 140s.
Investor demand was not overwhelming at around US$4bn, but the deal only offered a relatively modest new issue concession of about 5.5bp over where the issuer’s outstanding 4.075% 2023s were trading.
Those opco deals, issued out of Citibank, include a US$2.25bn bond in January, a US$1.7bn transaction in February and a US$1bn SOFR note as recently as March 7 – its first ever issuance to reference the new benchmark.
The Moody’s upgrade last month to A3 from Baa1 was widely viewed as the catalyst for Wednesday’s trade. S&P and Fitch have respective ratings of BBB+ and A.
But Matthew Minnetian, a portfolio manager at Alliance Bernstein, said Citigroup’s bonds were already trading like a Single A credit in anticipation of the upgrade.
“Investors have acknowledged that the ratings agencies have been behind and now the agencies are starting to catch up to where investors are viewing these credits,” Minnetian told IFR. “But maybe there was still a feeling from some investors that they needed the additional Single A rating.”
This is Citigroup’s first holdco issue since July 2018, according to IFR data, and there is plenty more to come.
It reached compliance with Total Loss Absorbing Capacity (TLAC) in the second half of 2018 and even had a US$9bn surplus by the end of the year, according to CreditSights.
But now, the bank is looking at US$15bn of holdco debt maturing this year and will need to replenish with new issuance.
It has already tapped the euro and sterling markets this year for holdco debt, including a £750m deal and a €1bn Green bond. That should increase US investor appetite for the bank’s home currency, CreditSights said.
Source: Nasdaq