Citigroup Sells Largest Note Tied to Chilean Peso in Three Years

Citigroup Inc. (C) sold 4.75 billion Chilean pesos ($10 million) of notes that make payments in U.S. dollars, the largest offering tied to the currency pair in at least three years.

The five-year securities, issued Feb. 15, pay higher returns when the peso strengthens against the dollar, according to a prospectus filed with the U.S. Securities and Exchange Commission. The notes yield 5 percent a year in pesos, which are then converted to dollars at the prevailing rate. The bank distributed the securities for a 1.75 percent fee.

U.S. investors bought $1.2 million of notes linked to the South American currency last year in one offering, according to data compiled by Bloomberg.

Scott Helfman, a spokesman for Citigroup in New York, declined to comment.

Banks create structured notes by packaging debt with derivatives to offer customized bets to retail investors while earning fees and raising money. Derivatives are contracts whose value is derived from stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

To contact the reporter on this story: Kevin Dugan in New York at kdugan4@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net