Citigroup plans third debt sale

Citigroup Inc. is offering three-year notes in its third bond sale this year as the bank, facing maturities from a 2008 emergency credit program, plans to raise as much as $20 billion in capital markets during 2012.

The third-biggest U.S. bank by assets may issue $1.25 billion of notes to yield 230 basis points, or 2.3 percentage points, more than similar-maturity Treasuries, said a person with knowledge of the offering, who declined to be identified because terms aren’t set. The bank sold $500 million of 3.625 percent, three-year debt in December at a spread of 323.9 basis points, according to data compiled by Bloomberg.

Citigroup, which also sold $3.5 billion of five- and 30- year debt last month, is tapping the market as yields on bank debt fall to 4 percent as of yesterday from 4.8 percent at the start of the year, according to Bank of America Merrill Lynch index data. New York-based Citigroup plans to issue about $15 billion to $20 billion of long-term debt this year after selling $15 billion of the securities in 2011, Treasurer Eric Aboaf said on a Jan. 24 earnings call.

“TLGP debt represented a significant amount of maturities in 2011 and is the bulk of our maturities in 2012,” Aboaf said on the call, referring to the U.S. government’s Temporary Liquidity Guarantee Program enacted in 2008 to stem a global financial crisis. “This wave of maturities is an industrywide situation, which came about as many banks issued TLGP and other government-guaranteed debt in 2008 and 2009,” he said.

‘Best-Capitalized’

The bank has $38 billion of TLGP-related debt due this year and $22.6 billion of unrelated debt maturing, according to a presentation on Citigroup’s website. Last year, it had $20.3 billion of TLGP debt mature and $30.4 billion of non-TLGP debt.

Citigroup’s three-year debt “would be attractive all the way to a spread of 170 basis points,” Morningstar Inc. analyst James Leonard said in a note today. The bank is “the best- capitalized” of the four largest U.S. banks, he said, citing core Tier 1 capital of 11.8 percent and a Tier 1 ratio at 13.6 percent.

John Deere Capital Corp., a finance unit of the world’s largest farm equipment maker, is marketing $1.5 billion of debt today in three parts, said a separate person with knowledge of the offering, who declined to be identified because terms aren’t set. The Deere & Co. unit may issue 28-month floating rate notes and five- and 10-year fixed-rate debt, the person said.