Citigroup Offers to Buy Back Bonds in Plan to Use ‘Excess Cash’

Citigroup Inc. (C) is offering to buy back outstanding bonds as the third-largest U.S. bank by assets seeks to use surplus cash to reduce its debt load.

The buyback relates to notes with an aggregate principal amount outstanding of about $12.4 billion and is part of the New York-based bank’s “liability management strategy that utilizes excess cash to retire generally older vintage debt,” according to a statement distributed by Business Wire. The offers are subject to a cap on each of the seven series of bonds, and expire at 11:59 p.m. New York time on Sept. 6.

Citigroup earlier this month said it would repurchase as much as $500 million of notes denominated in Swiss francs and pounds.

The securities in today’s tender offer include the bank’s $1.75 billion of 5.125 percent bonds due 2014, its 6 percent notes due 2017 and its 6.125 percent notes due 2018, according to the statement.

The lender’s 8.5 percent debt due 2019, 5.85 percent bonds due 2034, as well as $1 billion of 6.95 percent notes due 2018 sold by unit Associates Corp. are also included.

Citigroup is also offering to repurchase some of its $750 million of floating-rate notes due 2014, according to the statement.

The amount of debt to be bought back is subject to a maximum series tender cap, the bank said. If that cap is reached, Citigroup will end up buying back some $675 million of notes.

Apart from the floating-rate notes, which will be bought back at a fixed price of 97.25 cents on the dollar, the debt will be repurchased at a fixed spread over similar-maturity Treasuries, calculated as at 2 p.m. New York time on Aug. 23.

The spread for the 5.125 percent notes is 110 basis points; the spread for the 6 percent notes is 220 basis points; for the 6.125 percent notes 245 basis points; the 6.95 percent notes 295 basis points; the 8.5 percent notes 205 basis points and the 5.85 percent notes 180 basis points, according to the statement.

Bondholders tendering their securities prior to 5 p.m. on Aug. 22 will get an additional premium of three cents on the dollar.

To contact the reporter on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net