|
The information in this preliminary pricing supplement is not
complete and may be changed. A registration statement relating to
these securities has been filed with the Securities and Exchange
Commission. This preliminary pricing supplement and the
accompanying product supplement, underlying supplement, prospectus
supplement and prospectus are not an offer to sell these
securities, nor are they soliciting an offer to buy these
securities, in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED MAY 16, 2022
|
|
Citigroup Global Markets Holdings
Inc. |
May , 2022
Medium-Term Senior Notes, Series N
Pricing Supplement No. 2022—USNCH[ ]
Filed Pursuant to Rule 424(b)(2)
Registration Statement Nos. 333-255302 and 333-255302-03
|
Callable Fixed to Float SOFR CMS Spread Range Accrual Securities
Contingent on the Worst Performing of the Dow Jones Industrial
AverageTM, the EURO STOXX® Banks Index and
the S&P 500® Index Due May 30, 2042
|
§ |
Variable coupon.
The securities will pay interest at a fixed rate specified below
for three years following issuance. After the third year,
contingent interest will accrue on the securities during each
accrual period at a rate based on the SOFR CMS spread described
below, but only for each elapsed day during that accrual
period on which the accrual condition is satisfied. The accrual
condition will be satisfied on an elapsed day only if the
closing level of each underlying index on that day is
greater than or equal to its accrual barrier level. Accordingly,
contingent interest during each accrual period, if any, will depend
on the SOFR CMS spread and the level of each underlying index. The
amount of interest payable on the securities may be adversely
affected by adverse movements in any one of these
variables, regardless of the performance of the others. The
securities may pay low or no interest for extended periods of time
or even throughout the entire term after the third
year. |
|
§ |
Call
right. We have the right to call the securities for mandatory
redemption on any coupon payment date beginning approximately one
year after the issue date. |
|
§ |
Contingent repayment
of principal at maturity. If we do not redeem the securities
prior to maturity, your payment at maturity will depend on the
closing level of the worst performing underlying index on
the final valuation date. If the closing level of the worst
performing underlying index on the final valuation date is greater
than or equal to its final barrier level, you will be repaid the
stated principal amount of your securities at maturity. However, if
the closing level of the worst performing underlying index on the
final valuation date is less than its final barrier level, you will
lose 1% of the stated principal amount of your securities for every
1% by which the worst performing underlying index has depreciated
from its initial index level. There is no minimum payment at
maturity. |
|
§ |
The
securities offered by this pricing supplement are unsecured debt
securities issued by Citigroup Global Markets Holdings Inc. and
guaranteed by Citigroup Inc. Investors must be willing to accept
(i) an investment that may have limited or no liquidity and (ii)
the risk of not receiving any amount due under the securities if we
and Citigroup Inc. default on our obligations. All payments on
the securities are subject to the credit risk of Citigroup Global
Markets Holdings Inc. and Citigroup Inc. |
| KEY
TERMS |
|
|
Issuer: |
Citigroup
Global Markets Holdings Inc., a wholly owned subsidiary of
Citigroup Inc. |
|
Guarantee: |
All
payments due on the securities are fully and unconditionally
guaranteed by Citigroup Inc. |
|
Stated principal amount: |
$1,000
per security |
| Underlying
indices: |
Underlying indices |
Initial index level* |
Accrual barrier level** |
Final barrier level** |
|
|
Dow Jones Industrial
AverageTM |
|
|
|
|
|
EURO
STOXX® Banks Index |
|
|
|
|
|
S&P
500® Index |
|
|
|
| |
*
For each underlying index, its closing level on the pricing
date
** For each underlying index, 50% of its initial index level
|
|
SOFR
CMS spread: |
On any SOFR CMS spread determination date, the
30-year U.S. Dollar SOFR ICE swap rate (“SOFR CMS30”) minus
the 2-year U.S. Dollar SOFR ICE swap rate (“SOFR CMS2”) on that
day. SOFR CMS 30 and SOFR CMS2 are each referred to as a “USD SOFR
ICE swap rate.” See “Additional Terms of the Securities” and
“Information About SOFR, the USD SOFR ICE Swap Rates and the SOFR
CMS Spread” in this pricing supplement. |
|
SOFR CMS spread determination date: |
For any accrual period, the second U.S.
government securities business day prior to the first day of that
accrual period |
|
Pricing date: |
May 26, 2022 |
|
Issue date: |
May 31, 2022 |
|
Final valuation date: |
May 27, 2042, subject to postponement if such
date is not a scheduled trading day or certain market disruption
events occur |
|
Maturity date: |
Unless earlier redeemed, May 30, 2042
|
|
Payment at maturity: |
Unless earlier redeemed, at maturity you will receive, for each
security you then hold (in addition to the final coupon payment, if
any):
· If the final
index level of the worst performing underlying index is greater
than or equal to its final barrier level: $1,000
· If the final
index level of the worst performing underlying index is less
than its final barrier level:
$1,000 + ($1,000 × the index return of the worst performing
underlying index)
If the final index level of the worst performing underlying
index is less than its final barrier level, you will have full
downside exposure to the negative index return of the worst
performing underlying index and will receive significantly less
than the stated principal amount of your securities at maturity.
You may lose a significant portion, and up to all, of your
investment.
|
|
Coupon payments: |
On each coupon payment date occurring during the first three
years following issuance of the securities, the securities will
pay a fixed coupon of 12.00% per annum, regardless of the SOFR CMS
spread or the levels of the underlying indices.
On each coupon payment date after the third year (beginning
in August 2025), you will receive a coupon payment at an annual
rate equal to the variable coupon rate for that coupon payment
date. The variable coupon rate for any coupon payment date after
the third year will be determined as follows:
|
| relevant contingent rate per
annum × |
number of accrual days during the related accrual period
|
|
| number of elapsed days during the related accrual
period |
|
Each coupon payment per security will be equal to (i) $1,000
multiplied by the applicable coupon rate per annum
multiplied by (ii) day count fraction.
If the number of accrual days in a given accrual period is less
than the number of elapsed days in that accrual period, the
variable coupon rate for the related coupon payment date will be
less than the full relevant contingent rate, and if there are no
accrual days in a given accrual period, the variable coupon rate
for the related coupon payment date will be 0%.
|
|
Relevant contingent rate: |
The relevant contingent rate for any coupon payment date after the
third year following issuance of the securities means:
50.00 × the SOFR CMS spread (as of the SOFR CMS spread
determination date for the related accrual period), subject to a
minimum relevant contingent rate of 0.00% per annum and a maximum
relevant contingent rate of 12.00% per annum.
If the SOFR CMS spread for any SOFR CMS spread determination
date is less than or equal to 0.00%, the relevant contingent rate
for that accrual period will be 0.00% and you will not receive any
coupon payment on the related coupon payment date. The relevant
contingent rate will in no event exceed the maximum relevant
contingent rate.
|
|
Listing: |
The securities will not be listed on any
securities exchange |
|
Underwriter: |
Citigroup Global Markets Inc. (“CGMI”), an
affiliate of the issuer, acting as principal |
|
Underwriting fee and issue price: |
Issue
price(1) |
Underwriting
fee(2) |
Proceeds to
issuer(3) |
|
Per
security: |
$1,000 |
$50.00 |
$950.00 |
|
Total: |
$ |
$ |
$ |
| |
|
|
|
|
|
|
(Key Terms continued on next
page)
(1) Citigroup
Global Markets Holdings Inc. currently expects that the estimated
value of the securities on the pricing date will be at least
$850.00 per security, which will be less than the issue price. The
estimated value of the securities is based on CGMI’s proprietary
pricing models and our internal funding rate. It is not an
indication of actual profit to CGMI or other of our affiliates, nor
is it an indication of the price, if any, at which CGMI or any
other person may be willing to buy the securities from you at any
time after issuance. See “Valuation of the Securities” in this
pricing supplement.
(2) CGMI will
receive an underwriting fee of up to $50.00 for each security sold
in this offering. The total underwriting fee and proceeds to issuer
in the table above give effect to the actual total underwriting
fee. For more information on the distribution of the securities,
see “Supplemental Plan of Distribution” in this pricing supplement.
In addition to the underwriting fee, CGMI and its affiliates may
profit from expected hedging activity related to this offering,
even if the value of the securities declines. See “Use of Proceeds
and Hedging” in the accompanying prospectus.
(3) The per
security proceeds to issuer indicated above represent the minimum
per security proceeds to issuer for any security, assuming the
maximum per security underwriting fee. As noted above, the
underwriting fee is variable.
Investing in the securities involves risks not associated with
an investment in conventional debt securities. See “Summary Risk
Factors” beginning on page PS-8.
Neither the Securities and
Exchange Commission (the “SEC”) nor any state securities commission
has approved or disapproved of the securities or determined that
this pricing supplement and the accompanying product supplement,
underlying supplement, prospectus supplement and prospectus are
truthful or complete. Any representation to the contrary is a
criminal offense. You should read this pricing
supplement together with the accompanying product supplement,
underlying supplement, prospectus supplement and prospectus, which
can be accessed via the following hyperlinks:
Product
Supplement No. IE-05-07 dated May 11, 2021 Underlying Supplement No. 10 dated May 11,
2021
Prospectus Supplement and Prospectus
each dated May 11, 2021
The
securities are not bank deposits and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
governmental agency, nor are they obligations of, or guaranteed by,
a bank.
|
Citigroup Global Markets Holdings
Inc. |
| |
| KEY
TERMS (CONTINUED) |
|
|
Coupon payment dates: |
The last
day of each February and the 30th day of each May,
August and November, beginning on August 30, 2022, except that the
final coupon payment date will be the maturity date (or the earlier
date on which we redeem the securities, if applicable) |
|
Day count fraction: |
30/360.
See “Additional Terms of the Securities—Day Count Fraction” in this
pricing supplement for more information. |
|
Accrual period: |
For each
coupon payment date after the third year following issuance of the
securities, the period from and including the immediately preceding
coupon payment date to but excluding such coupon payment
date |
|
Accrual day: |
An
elapsed day on which the accrual condition is satisfied |
|
Elapsed day: |
Calendar
day |
|
Accrual condition: |
The
accrual condition will be satisfied on an elapsed day if, and only
if, the closing level of each underlying index is greater
than or equal to its accrual barrier level on that elapsed day. For
purposes of determining whether the accrual condition is satisfied
on any elapsed day, if the closing level of any underlying index is
not available for any reason on that day (including weekends and
holidays), the closing level of such underlying index will be
assumed to be the same as on the immediately preceding elapsed day
(subject to the discussion in the section “Description of the
Securities—Terms Related to the Underlying Index—Discontinuance or
Material Modification of the Underlying Index” in the accompanying
product supplement). In addition, for all elapsed days from and
including the fourth-to-last day that is a scheduled trading day
for each underlying index in an accrual period to and including the
last elapsed day of that accrual period, the closing levels of the
underlying indices will not be observed and will be assumed to be
the same as on the elapsed day immediately preceding such
unobserved days. |
|
Worst performing underlying index: |
The
underlying index with the lowest index return |
|
Final index level: |
For each
underlying index, its closing level on the final valuation
date |
|
Index return: |
For
each underlying index, (i) its final index level minus its
initial index level, divided by (ii) its initial index
level |
|
Early redemption: |
We
have the right to redeem the securities, in whole and not in part,
on any coupon payment date on or after May 30, 2023 upon not less
than five business days’ notice for an amount in cash equal to 100%
of the stated principal amount of your securities plus the coupon
payment due on the date of redemption, if any. |
|
CUSIP / ISIN: |
17330FSQ5 / US17330FSQ53 |
|
Citigroup Global Markets Holdings
Inc. |
| |
Additional Information
General. The terms of the securities are set forth in the
accompanying product supplement, prospectus supplement and
prospectus, as supplemented by this pricing supplement. The
accompanying product supplement, prospectus supplement and
prospectus contain important disclosures that are not repeated in
this pricing supplement. For example, certain events may occur that
could affect the amount of any variable coupon payment you receive
and your payment at maturity. These events and their consequences
are described in the accompanying product supplement in the
sections “Description of the Securities—Terms Related to the
Underlying Index—Discontinuance or Material Modification of the
Underlying Index” and “Description of the Securities—Terms Related
to the Underlying Index—Consequences of a Market Disruption Event;
Postponement of the Final Valuation Date,” and not in this pricing
supplement. In addition, the accompanying underlying supplement
contains important disclosures regarding the underlying indices
that are not repeated in this pricing supplement. It is important
that you read the accompanying product supplement, underlying
supplement, prospectus supplement and prospectus together with this
pricing supplement before deciding whether to invest in the
securities. Certain terms used but not defined in this pricing
supplement are defined in the accompanying product supplement.
Although the accompanying product supplement contemplates only a
single underlying index, the securities are linked to three
underlying indices. Each of the provisions in the accompanying
product supplement referring to the underlying index shall apply
separately to each of the underlying indices to which the
securities are linked. For provisions related to the SOFR CMS
rates, see “Additional Terms of the Securities” in this pricing
supplement.
Postponement of the final valuation date. If the scheduled
final valuation date is not a scheduled trading day for any
underlying index or if a market disruption event occurs with
respect to any underlying index on the scheduled final valuation
date, the final valuation date will be subject to postponement as
described in the accompanying product supplement in the section
“Description of the Securities—Terms Related to the Underlying
Index—Consequences of a Market Disruption Event; Postponement of
the Final Valuation Date.” If the scheduled final valuation date is
postponed, the closing level of each underlying index in respect of
the final valuation date will be determined based on (i) for any
underlying index for which the originally scheduled final valuation
date is a scheduled trading day and as to which a market disruption
event does not occur on the originally scheduled final valuation
date, the closing level of such underlying index on the originally
scheduled final valuation date and (ii) for any other underlying
index, the closing level of such underlying index on the final
valuation date as postponed (or, if earlier, the first scheduled
trading day for such underlying index following the originally
scheduled final valuation date on which a market disruption event
did not occur with respect to such underlying index).
|
Citigroup Global Markets Holdings
Inc. |
| |
Hypothetical Examples
Variable Coupon
Payments
The sections below provide
examples of how the variable coupon payments on the securities will
be determined. The first section, “—Determining the Hypothetical
Relevant Contingent Rate,” provides a limited number of
hypothetical examples of how the relevant contingent rate for any
accrual period will be determined based on hypothetical SOFR CMS
spread values, as determined on the second U.S. government
securities business day prior to the beginning of the applicable
accrual period. The second section, “—Determining the Hypothetical
Variable Coupon Rates and Variable Coupon Payments,” provides a
limited number of hypothetical examples of how the coupon payments
on the securities will be determined based on a limited number of
hypothetical relevant contingent interest rates and a limited
number of hypothetical accrual days during a hypothetical accrual
period. The figures below have been rounded for ease of
analysis.
Determining the
Hypothetical Relevant Contingent Rate
The table below presents
examples of hypothetical relevant contingent rates based on various
hypothetical SOFR CMS spread values.
|
Example |
Hypothetical SOFR CMS Spread* |
Hypothetical Relevant Contingent Rate per
Annum** |
|
1 |
-1.00% |
0.00% |
|
2 |
-0.80% |
0.00% |
|
3 |
-0.60% |
0.00% |
|
4 |
-0.40% |
0.00% |
|
5 |
-0.20% |
0.00% |
|
6 |
0.00% |
0.00% |
|
7 |
0.10% |
5.00% |
|
8 |
0.20% |
10.00% |
|
9 |
0.30% |
12.00% |
|
10 |
0.40% |
12.00% |
|
11 |
0.50% |
12.00% |
|
12 |
0.60% |
12.00% |
|
13 |
0.80% |
12.00% |
|
14 |
1.00% |
12.00% |
|
15 |
1.20% |
12.00% |
|
16 |
1.40% |
12.00% |
|
17 |
1.60% |
12.00% |
|
18 |
1.80% |
12.00% |
|
19 |
2.00% |
12.00% |
|
20 |
2.20% |
12.00% |
|
21 |
2.40% |
12.00% |
|
22 |
2.60% |
12.00% |
_______________________________
* Hypothetical SOFR CMS
spread = (SOFR CMS30 – SOFR CMS2), where SOFR CMS30 and SOFR CMS2
are determined on the second U.S. government securities business
day prior to the beginning of the applicable accrual
period.
** Hypothetical relevant
contingent rate per annum for the accrual period = 50.00 ×
hypothetical SOFR CMS spread, subject to a minimum of 0.00% and a
maximum of 12.00% per annum.
Determining the Hypothetical Variable Coupon Rates and Variable
Coupon Payments
The tables below present
examples of the hypothetical variable coupon rate and hypothetical
variable coupon payments after the third year following issuance of
the securities based on the number of accrual days in a particular
accrual period and different assumptions about the SOFR CMS spread.
For illustrative purposes only, the tables assume an accrual period
that contains 90 elapsed days and that the securities have not
previously been redeemed. The actual coupon payment for any coupon
payment date after the third year will depend on the actual number
of accrual days and elapsed days during the related accrual period
and the actual SOFR CMS spread on the SOFR CMS spread determination
date for that accrual period. The variable coupon rate for each
accrual period will apply only to that accrual period.
|
Citigroup Global Markets Holdings
Inc. |
| |
Assuming the SOFR CMS
spread is 0.10% on the applicable SOFR CMS spread determination
date:
|
Hypothetical Number of Accrual Days in Accrual
Period* |
Hypothetical Relevant Contingent Rate per
Annum** |
Hypothetical Variable Coupon Rate per Annum*** |
Hypothetical Variable Coupon Payment per
Security**** |
|
0 |
5.000% |
0.000% |
$0.00 |
|
15 |
5.000% |
0.833% |
$2.08 |
|
30 |
5.000% |
1.667% |
$4.17 |
|
45 |
5.000% |
2.500% |
$6.25 |
|
60 |
5.000% |
3.333% |
$8.33 |
|
75 |
5.000% |
4.167% |
$10.42 |
|
90 |
5.000% |
5.000% |
$12.50 |
Assuming the SOFR CMS
spread is 2.00% on the applicable SOFR CMS spread determination
date:
|
Hypothetical Number of Accrual Days in Accrual
Period* |
Hypothetical Relevant Contingent Rate per
Annum** |
Hypothetical Variable Coupon Rate per Annum*** |
Hypothetical Variable Coupon Payment per
Security**** |
|
0 |
12.000% |
0.000% |
$0.00 |
|
15 |
12.000% |
2.000% |
$5.00 |
|
30 |
12.000% |
4.000% |
$10.00 |
|
45 |
12.000% |
6.000% |
$15.00 |
|
60 |
12.000% |
8.000% |
$20.00 |
|
75 |
12.000% |
10.000% |
$25.00 |
|
90 |
12.000% |
12.000% |
$30.00 |
Assuming the SOFR CMS
spread is 0.00% on the applicable SOFR CMS spread determination
date:
|
Hypothetical Number of Accrual Days in Accrual
Period* |
Hypothetical Relevant Contingent Rate per
Annum** |
Hypothetical Variable Coupon Rate per Annum*** |
Hypothetical Variable Coupon Payment per
Security**** |
|
0 |
0.000% |
0.000% |
$0.00 |
|
15 |
0.000% |
0.000% |
$0.00 |
|
30 |
0.000% |
0.000% |
$0.00 |
|
45 |
0.000% |
0.000% |
$0.00 |
|
60 |
0.000% |
0.000% |
$0.00 |
|
75 |
0.000% |
0.000% |
$0.00 |
|
90 |
0.000% |
0.000% |
$0.00 |
_______________________________
* An accrual day is an
elapsed day on which the accrual condition is satisfied (i.e., on
which the closing level of each underlying index is greater than or
equal to its accrual barrier level)
** The hypothetical relevant
contingent rate is equal to 50.00 × SOFR CMS spread (as of the SOFR
CMS spread determination date for the related accrual period),
subject to a minimum of 0.00% and a maximum of 12.00% per
annum
*** The hypothetical variable
coupon rate per annum is equal to (i) the hypothetical relevant
contingent rate per annum multiplied by (ii) (a) the
hypothetical number of accrual days in the related accrual period,
divided by (b) 90
**** The hypothetical
variable coupon payment per security is equal to (i) $1,000
multiplied by the hypothetical variable coupon rate per
annum, multiplied by (ii) day count fraction
|
Citigroup Global Markets Holdings
Inc. |
| |
Payment at Maturity
The diagram below illustrates your payment at maturity for a range
of hypothetical index returns of the worst performing underlying
index (excluding the final coupon payment, if any, and assuming we
do not redeem the securities prior to maturity).
|
Callable Fixed to Float Range Accrual Securities
Payment at Maturity Diagram
|
 |
Your actual payment at maturity per security, excluding the final
coupon payment, if any, will depend on the actual initial index
level, the actual final barrier level and the actual final index
level of the worst performing underlying index. The examples below
are intended to illustrate how your payment at maturity will depend
on whether the final index level of the worst performing underlying
index is greater than or less than its final barrier level and, if
less, how much less. The examples are solely for illustrative
purposes, do not show all possible outcomes and are not a
prediction of what the actual payment at maturity on the securities
will be.
The examples below are based on hypothetical initial index levels
of 100 and hypothetical final barrier levels of 50 and do not
reflect the actual initial index levels or final barrier levels.
For the actual initial index levels and final barrier levels, see
the cover page of this pricing supplement. We have used these
hypothetical levels, rather than the actual levels, to simplify the
calculations and aid understanding of how the securities work.
However, you should understand that the actual payment at maturity
on the securities will be calculated based on the actual initial
index levels and final barrier levels, and not these hypothetical
levels.
Example 1—Par Scenario A.
|
Underlying
Index |
Hypothetical
Initial Index Level |
Hypothetical
Final Barrier Level |
Hypothetical
Final Index Level |
Hypothetical
Index Return |
|
Dow
Jones Industrial AverageTM |
100 |
50 |
150 |
50% |
|
EURO
STOXX® Banks Index |
100 |
50 |
110 |
10% |
|
S&P
500® Index |
100 |
50 |
120 |
20% |
In this example, the EURO STOXX® Banks Index is the
worst performing underlying index. Its hypothetical final index
level is 110 (a 10% increase from its hypothetical initial index
level), which is greater than its hypothetical final barrier
level.
Payment at maturity per security = $1,000 (excluding the final
coupon payment, if any)
Because the final index level of the worst performing underlying
index is greater than its final barrier level, you would be repaid
the stated principal amount of your securities in this example.
Even though each of the underlying indices have appreciated from
their respective initial index levels in this example, you would
not participate in the appreciation of any underlying index.
|
Citigroup Global Markets Holdings
Inc. |
| |
Example 2—Par Scenario B.
|
Underlying
Index |
Hypothetical
Initial Index Level |
Hypothetical
Final Barrier Level |
Hypothetical
Final Index Level |
Hypothetical
Index Return |
|
Dow
Jones Industrial AverageTM |
100 |
50 |
90 |
-10% |
|
EURO
STOXX® Banks Index |
100 |
50 |
120 |
20% |
|
S&P
500® Index |
100 |
50 |
80 |
-20% |
In this example, the S&P 500® Index is the worst
performing underlying index. Its hypothetical final index level is
80 (a 20% decrease from its hypothetical initial index level),
which is greater than its hypothetical final barrier level.
Payment at maturity per security = $1,000 (excluding the final
coupon payment, if any)
Because the worst performing underlying index did not depreciate
from its hypothetical initial index level to its hypothetical final
index level by more than 50% (that is, it did not depreciate below
its hypothetical final barrier level), your payment at maturity in
this scenario would be equal to the $1,000 stated principal amount
per security (excluding the final coupon payment, if any).
Example 3—Downside Scenario.
|
Underlying
Index |
Hypothetical
Initial Index Level |
Hypothetical
Final Barrier Level |
Hypothetical
Final Index Level |
Hypothetical
Index Return |
|
Dow
Jones Industrial AverageTM |
100 |
50 |
30 |
-70% |
|
EURO
STOXX® Banks Index |
100 |
50 |
80 |
-20% |
|
S&P
500® Index |
100 |
50 |
90 |
-10% |
In this example, the Dow Jones Industrial AverageTM is
the worst performing underlying index. Its hypothetical final index
level is 30 (a 70% decrease from its hypothetical initial index
level), which is less than its hypothetical final barrier level. As
a result, your payment at maturity (excluding the final coupon
payment, if any) would be calculated as follows:
Payment at maturity per security = $1,000 + ($1,000 × the index
return of the worst performing underlying index)
=
$1,000 + ($1,000 × -70%)
=
$1,000 + -$700
=
$300
Because the worst performing underlying index depreciated from its
hypothetical initial index level to its hypothetical final index
level by more than 50% (that is, it depreciated below its
hypothetical final barrier level), your payment at maturity in this
scenario would reflect 1-to-1 exposure to the negative performance
of the worst performing underlying index from its initial index
level to its final index level.
|
Citigroup Global Markets Holdings
Inc. |
| |
Summary Risk Factors
An investment in the securities is significantly riskier than an
investment in conventional debt securities. The securities are
subject to all of the risks associated with an investment in our
conventional debt securities (guaranteed by Citigroup Inc.),
including the risk that we and Citigroup Inc. may default on our
obligations under the securities, and are also subject to risks
associated with SOFR CMS30, SOFR CMS2 and each of the underlying
indices. Accordingly, the securities are suitable only for
investors who are capable of understanding the complexities and
risks of the securities. You should consult your own financial, tax
and legal advisors as to the risks of an investment in the
securities and the suitability of the securities in light of your
particular circumstances.
The following is a summary of certain key risk factors for
investors in the securities. You should read this summary together
with the more detailed description of risks relating to an
investment in the securities contained in the section “Risk Factors
Relating to the Securities” beginning on page EA-6 in the
accompanying product supplement. You should also carefully read the
risk factors included in the accompanying prospectus supplement and
in the documents incorporated by reference in the accompanying
prospectus, including Citigroup Inc.’s most recent Annual Report on
Form 10-K and any subsequent Quarterly Reports on Form 10-Q, which
describe risks relating to the business of Citigroup Inc. more
generally.
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You may lose some or all of your investment. Unlike
conventional debt securities, the securities do not repay a fixed
amount of principal at maturity. Instead, your payment at maturity
will depend on the performance of the worst performing underlying
index. If we do not redeem the securities prior to maturity, you
may receive significantly less than the stated principal amount of
the securities at maturity, but in no circumstance will you receive
more than the stated principal amount of the securities (excluding
the final coupon payment, if any). If the final index level of the
worst performing underlying index is less than its final barrier
level, you will lose 1% of the stated principal amount of the
securities for every 1% by which the final index level of the worst
performing underlying index is less than its initial index level.
There is no minimum payment at maturity on the securities, and you
may lose up to all of your investment. |
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The barrier feature of the securities exposes you to
particular risks. If the final index level of the worst
performing underlying index is less than its final barrier level,
you will not be repaid the stated principal amount of your
securities at maturity and instead will lose 1% of the stated
principal amount of the securities for every 1% by which the final
index level of the worst performing underlying index is less than
its initial index level. Therefore, the securities offer no
protection at all if the worst performing underlying index
depreciates by more than 50% from its initial index level to its
final index level. As a result, you may lose your entire investment
in the securities. |
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The securities offer a variable coupon rate after the third
year following issuance, and you may not receive any coupon payment
on one or more coupon payment dates. Any variable coupon
payment you receive will be paid at a per annum rate equal to the
relevant contingent rate for the applicable coupon payment date
only if the accrual condition is satisfied on each
elapsed day during the related accrual period. The accrual
condition will be satisfied on any elapsed day only if the
closing level of each underlying index on that elapsed day
is greater than or equal to its respective accrual barrier level.
If, on any elapsed day during an accrual period, the accrual
condition is not satisfied, the applicable variable coupon payment
will be paid at a rate that is less, and possibly significantly
less, than the relevant contingent rate. If, on each elapsed day
during an accrual period, the accrual condition is not satisfied,
no variable coupon payment will be made on the related coupon
payment date. Accordingly, there can be no assurance that you will
receive a variable coupon payment on any coupon payment date or
that any variable coupon payment you do receive will be calculated
at the full relevant contingent rate. Furthermore, because the
relevant contingent rate is a floating rate determined by reference
to the SOFR CMS spread, the securities are subject to a contingency
associated with the SOFR CMS spread. The relevant contingent rate
will vary based on fluctuations in the SOFR CMS spread. If the SOFR
CMS spread narrows, the relevant contingent rate will be reduced.
The relevant contingent rate may be as low as zero for any coupon
payment date. If the relevant contingent rate is zero for any
coupon payment date, you will not receive any variable coupon
payment on that coupon payment date even if the accrual condition
is satisfied on each elapsed day in the related accrual period.
Thus, the securities are not a suitable investment for investors
who require regular fixed income payments. |
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The relevant contingent rate may decline, possibly to 0.00%, if
short-term interest rates rise. Although there is no single
factor that determines SOFR CMS spreads, the spread between longer-
and shorter-term interest rates has historically tended to fall
when short-term interest rates rise. Short-term interest rates have
historically been highly sensitive to the monetary policy of the
Federal Reserve Board. Accordingly, one significant risk assumed by
investors in the securities is that the Federal Reserve Board may
pursue a policy of raising short-term interest rates, which, if
historical patterns hold, would lead to a decrease in the SOFR CMS
spread. In that event, the relevant contingent rate would be
reduced, and may be 0.00%, and the floating rate payable on the
securities would also decline significantly, possibly to 0.00%. It
is important to understand, however, that short-term interest rates
are affected by many factors and may increase even in the absence
of a Federal Reserve Board policy to increase short-term interest
rates. Furthermore, it is important to understand that the SOFR CMS
spread may decrease even in the absence of an increase in
short-term interest rates because it, too, is influenced by many
complex factors. |
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The relevant contingent rate on the securities may be lower than
other market interest rates. The relevant contingent rate on
the securities will not necessarily move in line with general U.S.
market interest rates or even USD SOFR ICE swap rates and, in fact,
may move inversely with general U.S. market interest rates. For
example, if there is a general increase in USD SOFR ICE swap rates
but shorter-term rates rise more than longer-term rates, the SOFR
CMS spread will decrease, as will the relevant contingent rate.
Accordingly, the securities are not appropriate for investors who
seek floating interest payments based on general market interest
rates. |
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The relevant contingent rate on the securities is subject to a
cap. As a result, the securities may pay interest at a lower
rate than an alternative instrument that is not so
capped. |
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The higher potential yield offered by the securities is
associated with greater risk than conventional debt securities.
The securities offer coupon payments with the potential to result
in a higher yield than the yield on our conventional debt
securities of the same maturity. You should understand that, in
exchange for this potentially higher yield, you will be exposed to
significantly greater |
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Citigroup Global Markets Holdings
Inc. |
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risks than investors in our conventional debt securities
(guaranteed by Citigroup Inc.). These risks include the risk that
the variable coupon payments you receive, if any, will result in a
yield on the securities that is lower, and perhaps significantly
lower, than the yield on our conventional debt securities of the
same maturity that are guaranteed by Citigroup Inc., and the risk
that you will incur a significant loss on the securities at
maturity. The volatility of the SOFR CMS spread and each of the
underlying indices, and the correlation between the underlying
indices and between the SOFR CMS spread and each underlying index,
are important factors affecting this risk. Greater expected
volatility and/or lower expected correlation as of the pricing date
may contribute to the higher yield potential, but would also
represent a greater expected likelihood as of the pricing date
that, after the third year, you will receive low or no coupon
payments on the securities and that you would incur a significant
loss on the securities at maturity.
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The
securities are subject to risks associated with the USD SOFR ICE
swap spread and each of the underlying indices and may be
negatively affected by adverse movements in any one of these
variables, regardless of the performance of the others. The
amount of any variable coupon payments you receive will depend on
the performance of the SOFR CMS spread and each of the underlying
indices. If the SOFR CMS spread is low or zero, causing the relevant
contingent rate to be low or zero, the securities will pay a
low or no coupon even if the closing levels of the underlying
indices are consistently greater than their respective accrual
barrier levels. Conversely, even if the SOFR CMS spread is high,
causing the relevant contingent rate to be high, the securities
will pay no coupon if the closing level of any of the underlying
indices is consistently less than its respective accrual barrier
level. Moreover, if the closing level of any one of the underlying
indices is less than its respective accrual barrier level, the
accrual condition will not be satisfied, and no interest will
accrue on the securities, even if the closing levels of the other
underlying indices are significantly greater than their accrual
barrier levels. Accordingly, you will be subject to risks
associated with the SOFR CMS spread and each of the underlying
indices, and your return on the securities will depend
significantly on the relationship between such risks over the term
of the securities. If any one performs sufficiently poorly, you may
receive low or no variable coupon payments for an extended period
of time, or even throughout the entire period following the third
year of the term of the securities, even if the others perform
favorably. Furthermore, if the final index level of one underlying
index is less than its final barrier level, you will incur a
significant loss at maturity, even if the final index levels of the
other underlying indices are greater than their respective final
barrier levels. |
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The
variable coupon payments and the payment at maturity depend on
multiple variables, and you are therefore exposed to greater risks
of receiving no variable coupon payments after the third year, and
to a greater risk of loss at maturity, than if the securities were
linked to just one variable. The risk that you will receive no
variable coupon payment on one or more coupon payment dates after
the third year, and the risk that you will incur a significant loss
at maturity, is greater if you invest in the securities as opposed
to substantially similar securities that are linked to the
performance of just one variable. With multiple variables, it is
more likely that the securities will accrue low or no interest
during an accrual period, or that you will not be repaid the stated
principal amount of your securities at maturity, than if payments
on the securities were contingent on only one variable. |
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The
securities will be subject to risks associated with the SOFR CMS
spread. The relevant contingent rate for any coupon payment
date after the third year following issuance of the securities will
depend on the SOFR CMS spread as of the SOFR CMS spread
determination date for the related accrual period. |
The relevant contingent rate will not depend on the absolute level
of either SOFR CMS30 or SOFR CMS2, but rather on the relationship
between SOFR CMS30 and SOFR CMS2—specifically, whether SOFR CMS30
is greater than SOFR CMS2. Many factors affect SOFR CMS30 and SOFR
CMS2, such that future values of SOFR CMS30 and SOFR CMS2 and their
relationship are impossible to predict. If the SOFR CMS spread for
any SOFR CMS spread determination date is less than or equal to
0.00%, the relevant contingent rate for that accrual period will be
0.00% and you will not receive any coupon payment on the related
coupon payment date.
Although there is no single factor that determines the SOFR CMS
spread, the spread between
longer- and shorter-term interest rates has historically tended to
fall when short-term interest rates rise. As with USD SOFR
ICE swap rates, short-term interest rates are influenced by many
complex factors, and it is impossible to predict their future
performance. However, historically short-term interest rates have
been highly sensitive to the monetary policy of the Federal Reserve
Board. Accordingly, one significant risk assumed by investors in
the securities is that the Federal Reserve Board may pursue a
policy of raising short-term interest rates, which, if historical
patterns hold, would lead to a decrease in the SOFR CMS spread,
possibly to a level that is below 0.00%. It is important to
understand that, although the policies of the Federal Reserve Board
have historically had a significant influence on short-term
interest rates, short-term interest rates are affected by many
factors and may increase even in the absence of a Federal Reserve
Board policy to increase short-term interest rates. Furthermore, it
is important to understand that the SOFR CMS spread may decrease
even in the absence of an increase in short-term interest rates
because it, too, is influenced by many complex factors. Another
circumstance when the spread between longer- and shorter-term
interest rates has historically tended to fall and become negative
is when the market expects an economic recession. Accordingly,
another significant risk assumed by investors in the securities is
that the market may anticipate a recession or that there may be a
recession.
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The securities may be called for mandatory redemption at our
option after the first year of their term, which limits your
ability to receive coupon payments if the SOFR CMS spread and the
underlying indices perform favorably. In determining whether to
redeem the securities, we will consider various factors, including
then current market interest rates and our expectations about
payments we will be required to make on the securities in the
future. If we call the securities for mandatory redemption, we will
do so at a time that is advantageous to us and without regard to
your interests. We are more likely to redeem the securities at a
time when the SOFR CMS spread and underlying indices are performing
favorably from your perspective and when we expect them to continue
to do so. Therefore, although the securities offer coupon payments
with the potential to result in a higher yield than the yield on
our conventional debt securities of the same maturity, if the
securities are paying that higher yield and we expect them to
continue to do so, it is more likely that we would redeem the
securities. Accordingly, the redemption feature of the securities
is likely to limit the benefits you receive from the coupon
payments. If we exercise our redemption right prior to maturity,
you may not be able to reinvest your funds in another investment
that provides a similar yield with a similar level of risk.
Alternatively, if the SOFR CMS spread and/or an underlying index is
performing unfavorably from your perspective or when we expect it
to do so in the future, we are less likely to call the securities,
so that you may continue to hold securities paying below-market or
no interest for an extended period of time. |
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Inc. |
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The closing levels of the underlying indices will not be
observed on certain days and will be assumed to be the same as on
earlier days, which will cause certain days to have a greater
weight in determining the variable coupon rate. With respect to
an elapsed day on which the closing level of an underlying index is
not available, the closing level of such underlying index for that
day will be deemed to be the same as on the immediately preceding
elapsed day on which the level is available. In addition, for
purposes of determining whether the accrual condition is satisfied,
for all elapsed days from and including the fourth-to-last day that
is a scheduled trading day for each underlying index in an accrual
period to and including the last elapsed day of that accrual
period, the closing levels of the underlying indices will not be
observed and will be assumed to be the same as on the elapsed day
immediately preceding such unobserved days. The relative weighting
of the applicable preceding elapsed day will be magnified for
purposes of determining whether such elapsed day qualifies as an
accrual day. Under these circumstances, if the applicable preceding
elapsed day is not an accrual day, each successive day on which the
closing level of that underlying index is not observed will also
not qualify as an accrual day. As a result, to the extent that such
preceding elapsed day is not an accrual day, such preceding elapsed
day will have a greater weight in determining the number of accrual
days during an accrual period. This could adversely affect the
amount of any variable coupon payment. |
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The return on the securities will be limited. The return
on the securities will be limited to the sum of your coupon
payments, even if the closing level of an underlying index greatly
exceeds its initial index level at one or more times during the
term of the securities. The maximum possible return on the
securities after the third year is the maximum relevant contingent
rate indicated on the cover of this pricing supplement, which would
be achieved only if (i) the relevant contingent rate is the maximum
relevant contingent rate for each accrual period, (ii) the closing
level of each underlying index is greater than or equal to its
accrual barrier level on each elapsed day during the term of the
securities after the third year and (iii) the final index level of
the worst performing underlying index is greater than or equal to
its final barrier level. Although you will bear the downside risk
relating to the worst performing underlying index if the worst
performing underlying index depreciates below its final barrier
level on the final valuation date, you will not receive the
dividend yield on, or share in any appreciation of, any underlying
index over the term of the securities. |
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You may not be adequately compensated for assuming the
downside risks of the underlying indices. The fixed coupon
payments during the first three years following issuance of the
securities and the variable coupon payments you receive on the
securities, if any, after the third year are the compensation you
receive for assuming the downside risks of the underlying indices,
as well as all the other risks of the securities. That compensation
is effectively “at risk” and may, therefore, be less than you
currently anticipate. First, the actual yield you realize on the
securities could be lower than you anticipate because the coupon
payments after the third year are variable and you may not receive
any variable coupon payment after the third year. Second, the fixed
coupon payments during the first three years following issuance of
the securities and the variable coupon payments, if any, after the
third year are the compensation you receive not only for assuming
the downside risk of the underlying indices, but also for all of
the other risks of the securities, including interest rate risk,
the risk that we may call the securities and our and Citigroup
Inc.’s credit risk. If those other risks increase or are otherwise
greater than you currently anticipate, the coupon payments may turn
out to be inadequate to compensate you for all the risks of the
securities, including the downside risk of the underlying
indices. |
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Your payment at maturity depends on the closing level of the
worst performing underlying index on a single day. Because your
payment at maturity (assuming we do not redeem the securities prior
to maturity) depends on the closing level of the worst performing
underlying index solely on the final valuation date, you are
subject to the risk that the closing level of the worst performing
underlying index on that day may be lower, and possibly
significantly lower, than on one or more other dates during the
term of the securities. If you had invested in another instrument
linked to the worst performing underlying index that you could sell
for full value at a time selected by you, or if the payment at
maturity were based on an average of closing levels of the worst
performing underlying index, you might have achieved better
returns. |
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The securities are subject to the credit risk of Citigroup
Global Markets Holdings Inc. and Citigroup Inc. If we default
on our obligations under the securities and Citigroup Inc. defaults
on its guarantee obligations, you may not receive anything owed to
you under the securities. |
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The securities will not be listed on any securities exchange
and you may not be able to sell them prior to maturity. The
securities will not be listed on any securities exchange.
Therefore, there may be little or no secondary market for the
securities. CGMI currently intends to make a secondary market in
relation to the securities and to provide an indicative bid price
for the securities on a daily basis. Any indicative bid price for
the securities provided by CGMI will be determined in CGMI’s sole
discretion, taking into account prevailing market conditions and
other relevant factors, and will not be a representation by CGMI
that the securities can be sold at that price, or at all. CGMI may
suspend or terminate making a market and providing indicative bid
prices without notice, at any time and for any reason. If CGMI
suspends or terminates making a market, there may be no secondary
market at all for the securities because it is likely that CGMI
will be the only broker-dealer that is willing to buy your
securities prior to maturity. Accordingly, an investor must be
prepared to hold the securities until maturity. |
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The securities may be riskier than securities with a shorter
term. The securities have a relatively long term to maturity,
subject to our right to call the securities for mandatory
redemption prior to maturity. By purchasing securities with a
longer term, you are more exposed to fluctuations in market
interest rates and equity markets than if you purchased securities
with a shorter term. Specifically, you will be negatively affected
if the SOFR CMS spread decreases or if the closing levels of the
underlying indices fall below their respective accrual barrier
levels. If either (i) the SOFR CMS spread decreases to a value that
is equal to or less than 0.00% per annum or (ii) the closing level
of any of the underlying indices is less than its accrual barrier
level on each day during an entire accrual period, you will be
holding a long-dated security that does not pay any coupon. |
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The estimated value of the securities on the pricing date,
based on CGMI’s proprietary pricing models and our internal funding
rate, will be less than the issue price. The difference is
attributable to certain costs associated with selling, structuring
and hedging the securities that are included in the issue price.
These costs include (i) the selling concessions paid in connection
with the offering of the securities, (ii) hedging and other costs
incurred by us and our affiliates in connection with the offering
of the securities and (iii) the expected profit (which may be more
or less than actual profit) to CGMI or other of our affiliates in
connection with hedging |
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our obligations under the securities. These costs adversely affect
the economic terms of the securities because, if they were lower,
the economic terms of the securities would be more favorable to
you. The economic terms of the securities are also likely to be
adversely affected by the use of our internal funding rate, rather
than our secondary market rate, to price the securities. See “The
estimated value of the securities would be lower if it were
calculated based on our secondary market rate” below.
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The estimated value of the securities was determined for us
by our affiliate using proprietary pricing models. CGMI derived
the estimated value disclosed on the cover page of this pricing
supplement from its proprietary pricing models. In doing so, it may
have made discretionary judgments about the inputs to its models,
such as the volatility of the underlying indices and the SOFR CMS
spread, the correlation among the underlying indices and the SOFR
CMS spread, dividend yields on the stocks that constitute the
underlying indices and interest rates. CGMI’s views on these inputs
may differ from your or others’ views, and as an underwriter in
this offering, CGMI’s interests may conflict with yours. Both the
models and the inputs to the models may prove to be wrong and
therefore not an accurate reflection of the value of the
securities. Moreover, the estimated value of the securities set
forth on the cover page of this pricing supplement may differ from
the value that we or our affiliates may determine for the
securities for other purposes, including for accounting purposes.
You should not invest in the securities because of the estimated
value of the securities. Instead, you should be willing to hold the
securities to maturity irrespective of the initial estimated
value. |
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The estimated value of the securities would be lower if it
were calculated based on our secondary market rate. The
estimated value of the securities included in this pricing
supplement is calculated based on our internal funding rate, which
is the rate at which we are willing to borrow funds through the
issuance of the securities. Our internal funding rate is generally
lower than our secondary market rate, which is the rate that CGMI
will use in determining the value of the securities for purposes of
any purchases of the securities from you in the secondary market.
If the estimated value included in this pricing supplement were
based on our secondary market rate, rather than our internal
funding rate, it would likely be lower. We determine our internal
funding rate based on factors such as the costs associated with the
securities, which are generally higher than the costs associated
with conventional debt securities, and our liquidity needs and
preferences. Our internal funding rate is not the same as the
coupon that is payable on the securities. |
Because there is not an active market for traded instruments
referencing our outstanding debt obligations, CGMI determines our
secondary market rate based on the market price of traded
instruments referencing the debt obligations of Citigroup Inc., our
parent company and the guarantor of all payments due on the
securities, but subject to adjustments that CGMI makes in its sole
discretion. As a result, our secondary market rate is not a
market-determined measure of our creditworthiness, but rather
reflects the market’s perception of our parent company’s
creditworthiness as adjusted for discretionary factors such as
CGMI’s preferences with respect to purchasing the securities prior
to maturity.
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The estimated value of the securities is not an indication
of the price, if any, at which CGMI or any other person may be
willing to buy the securities from you in the secondary market.
Any such secondary market price will fluctuate over the term of the
securities based on the market and other factors described in the
next risk factor. Moreover, unlike the estimated value included in
this pricing supplement, any value of the securities determined for
purposes of a secondary market transaction will be based on our
secondary market rate, which will likely result in a lower value
for the securities than if our internal funding rate were used. In
addition, any secondary market price for the securities will be
reduced by a bid-ask spread, which may vary depending on the
aggregate stated principal amount of the securities to be purchased
in the secondary market transaction, and the expected cost of
unwinding related hedging transactions. As a result, it is likely
that any secondary market price for the securities will be less
than the issue price. |
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The value of the securities prior to maturity will fluctuate
based on many unpredictable factors. The value of your
securities prior to maturity will fluctuate based on the level and
volatility of the underlying indices and the SOFR CMS spread and a
number of other factors, including the dividend yields on the
stocks that constitute the underlying indices, expectations of
future values of the SOFR CMS spread, interest rates generally, the
positive or negative correlation among the SOFR CMS spread and the
underlying indices, the time remaining to maturity of the
securities and our and Citigroup Inc.’s creditworthiness, as
reflected in our secondary market rate. Changes in the levels of
the SOFR CMS spread and/or the underlying indices may not result in
a comparable change in the value of your securities. You should
understand that the value of your securities at any time prior to
maturity may be significantly less than the issue price. |
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Immediately following issuance, any secondary market bid
price provided by CGMI, and the value that will be indicated on any
brokerage account statements prepared by CGMI or its affiliates,
will reflect a temporary upward adjustment. The amount of this
temporary upward adjustment will steadily decline to zero over the
temporary adjustment period. See “Valuation of the Securities” in
this pricing supplement. |
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The relationship between SOFR CMS30 and SOFR CMS2 may be
different than the relationship between USD SOFR ICE swap rates of
different maturities. The relevant contingent rate may be lower
than it would be if it were based on a USD SOFR ICE swap rates with
a longer maturity than 30 years or a shorter maturity than 2
years. |
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SOFR
CMS30 and SOFR CMS2 will be affected by a number of factors and may
be highly volatile. SOFR CMS30 and SOFR CMS2 are influenced by
many factors, including: |
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· |
the monetary policies of the Federal Reserve Board; |
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· |
current market expectations about future interest rates; |
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· |
current market expectations about inflation; |
|
· |
the volatility of the foreign exchange markets; |
|
· |
the availability of relevant hedging instruments; |
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Citigroup Global Markets Holdings
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· |
supply and demand for overnight U.S. Treasury repurchase
agreements; and |
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· |
general credit and economic conditions in global markets, and
particularly in the United States. |
As a result of these factors, SOFR CMS30 and SOFR CMS2 may be
highly volatile. Because SOFR CMS30 and SOFR CMS2 are market rates
and are influenced by many factors, it is impossible to predict the
future values of SOFR CMS30 and SOFR CMS2.
The SOFR CMS spread will be influenced by a number of complex
economic factors, including those that affect CMS rates generally.
However, the SOFR CMS spread depends not on how the relevant
economic factors affect any one USD SOFR ICE swap rate or even USD
SOFR ICE swap rates generally, but rather on how those factors
affect USD SOFR ICE swap rates of different maturities (i.e., SOFR
CMS30 and SOFR CMS2) differently.
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The
USD SOFR ICE swap rates and SOFR have limited histories and future
performance cannot be predicted based on historical
performance. The publication of the USD SOFR ICE swap rates
began in November 2021, and, therefore, have a limited history. ICE
Benchmark Administration Limited (“IBA”) launched the USD SOFR ICE
swap rates for use as a reference rate for financial instruments in
order to aid the market’s transition to SOFR and away from LIBOR.
However, the composition and characteristics of SOFR differ from
those of LIBOR in material respects, and the historical performance
of LIBOR and the USD LIBOR-based swap rates will have no bearing on
the performance of SOFR or the USD SOFR ICE swap rates. In
addition, the publication of SOFR began in April 2018, and,
therefore, it has a limited history. The future performance of the
USD SOFR ICE swap rates and SOFR cannot be predicted based on the
limited historical performance. The levels of USD SOFR ICE swap
rates and SOFR during the term of the securities may bear little or
no relation to the historical actual or historical indicative data.
Prior observed patterns, if any, in the behavior of market
variables and their relation to USD SOFR ICE swap rates and SOFR,
such as correlations, may change in the future. While some
pre-publication historical data for SOFR has been released by the
Federal Reserve Bank of New York (the “NY Federal Reserve”),
production of such historical indicative SOFR data inherently
involves assumptions, estimates and approximations. No future
performance of USD SOFR ICE swap rates or SOFR may be inferred from
any of the historical actual or historical indicative SOFR data.
Hypothetical or historical performance data are not indicative of,
and have no bearing on, the potential performance of USD SOFR ICE
swap rates or SOFR. Changes in the levels of SOFR will affect USD
SOFR ICE swap rates and, therefore, the return on the securities
and the value of the securities, but it is impossible to predict
whether such levels will rise or fall. |
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A
lack of input data may impact IBA’s ability to calculate and
publish the USD SOFR ICE swap rates. The input data for the USD
SOFR ICE swap rates is based on swaps referencing SOFR as the
floating leg. The USD SOFR ICE swap rates are dependent on
receiving sufficient eligible input data, from the trading venue
sources identified by IBA in accordance with the “Waterfall”
methodology for each USD SOFR ICE swap rate. The ability of the
applicable trading venues to provide sufficient eligible input data
in accordance with the Waterfall methodology depends on, among
other things, there being a liquid market in swap contracts
referencing SOFR on such trading venues, which in turn depends,
among other things, on there being a liquid market in loans,
floating rate notes and other financial contracts referencing SOFR.
Because SOFR’s use as a reference rate for financial contracts
began relatively recently and the related market for SOFR-based
swaps is relatively new, there is limited information on which to
assess potential future liquidity in SOFR-based swap markets or in
the market for SOFR-based financial contracts more generally. If
the market for SOFR-based swap contracts is not sufficiently
liquid, or if the liquidity in such market proves to be volatile,
this could result in the inability of IBA to calculate a USD SOFR
ICE swap rate, which could adversely affect the return on and value
of the securities and the price at which you are able to sell the
securities in the secondary market, if any. In addition, if SOFR
does not maintain market acceptance for use as a reference rate for
U.S. dollar denominated financial contracts, uncertainty about SOFR
may adversely affect the return on and the value of the
securities. |
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The
USD SOFR ICE swap rates may be determined by the calculation agent
in good faith using its reasonable judgment. If, on any SOFR
CMS spread determination date, a USD SOFR ICE swap rate is not
published (subject to a discontinuance as described below), then
the applicable USD SOFR ICE swap rate on that day will be
determined by the calculation agent in good faith and using its
reasonable judgment. A USD SOFR ICE swap rate determined in this
manner and used in the determination of any amounts payable on the
securities may be different from the USD SOFR ICE swap rate that
would have been published by the administrator of the USD SOFR ICE
swap rate. |
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The
manner in which USD SOFR ICE swap rates are calculated may change
in the future. The method by which USD SOFR ICE swap rates are
calculated may change in the future, as a result of governmental
actions, actions by the publisher of USD SOFR ICE swap rates or
otherwise. We cannot predict whether the method by which USD SOFR
ICE swap rates are calculated will change or what the impact of any
such change might be. Any such change could affect USD SOFR ICE
swap rates in a way that has a significant adverse effect on the
securities. |
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The EURO STOXX® Banks Index is subject to risks
associated with non-U.S. markets. Investments linked to the
value of non-U.S. stocks involve risks associated with the
securities markets in those countries, including risks of
volatility in those markets, governmental intervention in those
markets and cross-shareholdings in companies in certain countries.
Also, there is generally less publicly available information about
companies in some of these jurisdictions than about U.S. companies
that are subject to the reporting requirements of the SEC. Further,
non-U.S. companies are generally subject to accounting, auditing
and financial reporting standards and requirements and securities
trading rules that are different from those applicable to U.S.
reporting companies. The prices of securities in foreign markets
may be affected by political, economic, financial and social
factors in those countries, or global regions, including changes in
government, economic and fiscal policies and currency exchange
laws. Moreover, the economies in such countries may differ
favorably or unfavorably from the economy of the United States in
such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources and
self-sufficiency. |
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The
performance of the EURO STOXX® Banks Index will not be
adjusted for changes in the exchange rate between the euro and the
U.S. dollar. The closing level of the EURO STOXX®
Banks Index is calculated in euro, the value of which may be
subject to a high degree of fluctuation relative to the U.S.
dollar. However, the performance of the EURO STOXX®
Banks Index and the value of your securities will not be adjusted
for exchange rate fluctuations. If the euro appreciates relative to
the U.S. dollar over the term of the securities, the performance of
the EURO STOXX® Banks Index as measured for purposes of
the securities will be less than it would |
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have been if it offered exposure to that appreciation in addition
to the change in the prices of the stocks included in the EURO
STOXX® Banks Index.
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The EURO STOXX® Banks Index is subject to
concentrated risks associated with the banking industry. All or
substantially all of the equity securities included in the EURO
STOXX® Banks Index are issued by companies whose primary
line of business is directly associated with the banking industry.
As a result, the value of the securities may be subject to greater
volatility and be more adversely affected by a single economic,
political or regulatory occurrence affecting this industry than a
different investment linked to securities of a more broadly
diversified group of issues. The performance of bank stocks may be
affected by extensive governmental regulation, which may limit both
the amounts and types of loans and other financial commitments they
can make, the interest rates and fees they can charge and the
amount of capital they must maintain. Profitability is largely
dependent on the availability and cost of capital funds and can
fluctuate significantly when interest rates change. Credit losses
resulting from financial difficulties of borrowers can negatively
impact banking companies. Banks may also be subject to severe price
competition. Competition among banking companies is high and
failure to maintain or increase market share may result in lost
market share. The factors could affect the banking industry and
could affect the value of the equity securities included in the
EURO STOXX® Banks Index during the term of the
securities, which may adversely affect the value of your
securities. |
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Our
offering of the securities is not a recommendation of the SOFR CMS
spread or the underlying indices. The fact that we are offering
the securities does not mean that we believe that investing in an
instrument linked to the SOFR CMS spread and the underlying indices
is likely to achieve favorable returns. In fact, as we are part of
a global financial institution, our affiliates may have positions
(including short positions) in the stocks that constitute the
underlying indices or in instruments related to the SOFR CMS spread
or the underlying indices or such stocks, and may publish research
or express opinions, that in each case are inconsistent with an
investment linked to the SOFR CMS spread and the underlying
indices. These and other activities of our affiliates may affect
the SOFR CMS spread or the levels of the underlying indices in a
way that has a negative impact on your interests as a holder of the
securities. |
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Investing in the
securities is not equivalent to investing in any of the underlying
indices or the stocks that constitute any of the underlying
indices. You will not have voting rights, rights to receive
dividends or other distributions or any other rights with respect
to the stocks that constitute any of the underlying indices. You
will not participate in any appreciation of any of the underlying
indices over the term of the securities. |
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Adjustments to any
underlying index may affect the value of your securities. The
sponsors of the underlying indices may add, delete or substitute
the stocks that constitute the underlying indices or make other
methodological changes that could affect the levels of the
underlying indices. The sponsors of the underlying indices may
discontinue or suspend calculation or publication of the underlying
indices at any time without regard to your interests as a holder of
the securities. |
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USD
SOFR ICE swap rates and the levels of the underlying indices may be
adversely affected by our or our affiliates’ hedging and other
trading activities. We expect to hedge our obligations under
the securities through CGMI or other of our affiliates, who may
take positions directly in the interest rate swaps that are used to
determine USD SOFR ICE swap rates and/or in stocks that constitute
the underlying indices and other financial instruments related to
such interest rate swaps, the underlying indices or such stocks and
may adjust such positions during the term of the securities. Our
affiliates also trade the interest rate swaps that are used to
determine USD SOFR ICE swap rates and the stocks that constitute
the underlying indices and other financial instruments related to
such interest rate swaps, the underlying indices or such stocks on
a regular basis (taking long or short positions or both), for their
accounts, for other accounts under their management or to
facilitate transactions on behalf of customers. These activities
could affect USD SOFR ICE swap rates and/or the levels of the
underlying indices in a way that negatively affects the value of
the securities. They could also result in substantial returns for
us or our affiliates while the value of the securities
declines. |
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We
and our affiliates may have economic interests that are adverse to
yours as a result of our affiliates’ business activities. Our
affiliates may currently or from time to time engage in business
with the issuers of the stocks that constitute the underlying
indices, including extending loans to, making equity investments in
or providing advisory services to such issuers. In the course of
this business, we or our affiliates may acquire non-public
information about such issuers, which we will not disclose to you.
Moreover, if any of our affiliates is or becomes a creditor of any
such issuer, they may exercise any remedies against such issuer
that are available to them without regard to your
interests. |
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The calculation agent, which is an affiliate of ours, will
make important determinations with respect to the securities.
If certain events occur, such as market disruption events or the
discontinuance of an underlying index or a USD SOFR ICE swap rate,
CGMI, as calculation agent, will be required to make discretionary
judgments that could significantly affect your return on the
securities. Any of these determinations made by Citibank, N.A. in
its capacity as calculation agent may adversely affect any variable
interest payment owed to you under the securities or the amount
paid to you at maturity. |
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The U.S. federal tax consequences of an investment in the
securities are unclear. There is no direct legal authority
regarding the proper U.S. federal tax treatment of the securities,
and we do not plan to request a ruling from the Internal Revenue
Service (the “IRS”). Consequently, significant aspects of the tax
treatment of the securities are uncertain, and the IRS or a court
might not agree with the treatment of the securities as described
in “United States Federal Tax Considerations” below. If the IRS
were successful in asserting an alternative treatment of the
securities, the tax consequences of the ownership and disposition
of the securities might be materially and adversely affected.
Moreover, future legislation, Treasury regulations or IRS guidance
could adversely affect the U.S. federal tax treatment of the
securities, possibly retroactively. |
Non-U.S. investors should
note that persons having withholding responsibility in respect of
the securities may withhold on any coupon payment paid to a
non-U.S. investor, generally at a rate of 30%. To the extent that
we have withholding responsibility in respect of the securities, we
intend to so withhold.
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You should read carefully the
discussion under “United States Federal Tax Considerations” and
“Risk Factors Relating to the Securities” in the accompanying
product supplement and “United States Federal Tax Considerations”
in this pricing supplement. You should also consult your tax
adviser regarding the U.S. federal tax consequences of an
investment in the securities, as well as tax consequences arising
under the laws of any state, local or non-U.S. taxing
jurisdiction.
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Additional Terms of the Securities
Determination of a USD SOFR ICE Swap Rate
A
USD SOFR ICE swap rate of a given maturity on any date of
determination is the swap rate for a fixed-for-floating U.S. Dollar
SOFR-linked interest rate swap transaction with that maturity as
published by the administrator of the USD SOFR ICE swap rate as of
11:00 a.m. (New York City time) on that date of determination. If
the applicable USD SOFR ICE swap rate is not published on any U.S.
government securities business day on which such rate is required
(subject to “—Discontinuance of a USD SOFR ICE Swap Rate” below),
then the applicable USD SOFR ICE swap rate for that date will be
determined by the calculation agent in good faith and using its
reasonable judgment.
In a fixed-for-floating U.S. Dollar SOFR-linked interest rate swap
transaction, one party pays a fixed rate (the “swap rate”) and the
other pays a floating rate based on the secured overnight financing
rate (“SOFR”) compounded in arrears for twelve months using
standard market conventions. SOFR is intended to be a broad measure
of the cost of borrowing cash overnight collateralized by Treasury
securities. For more information about SOFR, see “About SOFR” in
this pricing supplement.
IBA is the current administrator of the USD SOFR ICE swap rate.
According to publicly available information (which we have not
independently verified), IBA currently determines the USD SOFR ICE
swap rate based on a “waterfall” methodology using eligible input
data in respect of SOFR-linked interest rate swaps. The first level
of the waterfall (“Level 1”) uses eligible, executable prices and
volumes provided by regulated, electronic, trading venues. If these
trading venues do not provide sufficient eligible input data to
calculate a rate in accordance with Level 1 of the methodology,
then the second level of the waterfall (“Level 2”) uses eligible
dealer to client prices and volumes displayed electronically by
trading venues. If there is insufficient eligible input data to
calculate a rate in accordance with Level 2 of the waterfall, then
the third level of the waterfall (“Level 3”) uses movement
interpolation, where possible for applicable tenors, to calculate a
rate. Where it is not possible to calculate a USD SOFR ICE swap
rate at Level 1, Level 2 or Level 3 of the waterfall on a given
date, then the USD SOFR ICE swap rate will not be published for
that date.
A
“U.S. government securities business day” means any day that is not
a Saturday, a Sunday or a day on which The Securities Industry and
Financial Markets Association’s U.S. holiday schedule recommends
that the fixed income departments of its members be closed for the
entire day for purposes of trading in U.S. government
securities.
Discontinuance of a USD SOFR ICE Swap Rate
If the calculation and publication of a USD SOFR ICE swap rate is
permanently canceled, then the calculation agent may identify an
alternative rate that it determines, in its sole discretion,
represents the same or a substantially similar measure or benchmark
as the applicable USD SOFR ICE swap rate, and the calculation agent
may deem that rate (the “successor rate”) to be the applicable USD
SOFR ICE swap rate. Upon the selection of any successor rate by the
calculation agent pursuant to this paragraph, references in this
pricing supplement to the original USD SOFR ICE swap rate will no
longer be deemed to refer to the original USD SOFR ICE swap rate
and will be deemed instead to refer to that successor rate for all
purposes. In such event, the calculation agent will make such
adjustments, if any, to any value of the applicable USD SOFR ICE
swap rate that is used for purposes of the securities and to any
other terms of the securities as it determines are appropriate in
the circumstances. Upon any selection by the calculation agent of a
successor rate, the calculation agent will cause notice to be
furnished to us and the trustee.
If the calculation and publication of a USD SOFR ICE swap rate is
permanently canceled and no successor rate is chosen as described
above, then the calculation agent will calculate the value of the
applicable USD SOFR ICE swap rate on each subsequent date of
determination in good faith and using its reasonable judgment. Such
value, as calculated by the calculation agent, will be the relevant
USD SOFR ICE swap rate for all purposes.
Notwithstanding these alternative arrangements, the cancellation of
a USD SOFR ICE swap rate may adversely affect payments on, and the
value of, the securities.
Day Count Fraction
Notwithstanding anything to the contrary in the accompanying
product supplement, each coupon payment per security will be equal
to (i) $1,000 multiplied by the applicable coupon rate per annum
multiplied by (ii) Day Count Fraction, where Day Count Fraction
will be calculated based on the following formula:
where:
“Y1” is the year, expressed as a number, in which the
first day of the interest calculation period falls;
“Y2” is the year, expressed as a number, in which the
day immediately following the last day included in the interest
calculation period falls;
“M1” is the calendar month, expressed as a number, in
which the first day of the interest calculation period falls;
“M2” is the calendar month, expressed as a number, in
which the day immediately following the last day included in the
interest calculation period falls;
“D1” is the first calendar day, expressed as a number,
of the interest calculation period, unless such number would be 31,
in which case D1 will be 30; and
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“D2” is the calendar day, expressed as a number,
immediately following the last day included in the interest
calculation period, unless such number would be 31 and
D1 is greater than 29, in which case
D2 will be 30.
For purposes of the above formula, the “interest calculation
period” with respect to any coupon payment date is the period from,
and including, the immediately preceding coupon payment date (or,
in the case of the first coupon payment date, the issue date) to,
but excluding, the current coupon payment date.
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Information About SOFR, the USD SOFR ICE Swap Rates and the SOFR
CMS Spread
SOFR
SOFR is published by the NY Federal Reserve and is intended to be a
broad measure of the cost of borrowing cash overnight
collateralized by Treasury securities. The NY Federal Reserve
reports that SOFR includes all trades in the Broad General
Collateral Rate, plus bilateral Treasury repurchase agreement
(“repo”) transactions cleared through the delivery-versus-payment
service offered by the Fixed Income Clearing Corporation (the
“FICC”), a subsidiary of The Depository Trust & Clearing
Corporation (“DTCC”). SOFR is filtered by the NY Federal Reserve to
remove a portion of the foregoing transactions considered to be
“specials”. According to the NY Federal Reserve, “specials” are
repos for specific-issue collateral which take place at
cash-lending rates below those for general collateral repos because
cash providers are willing to accept a lesser return on their cash
in order to obtain a particular security.
The NY Federal Reserve reports that SOFR is calculated as a
volume-weighted median of transaction-level tri-party repo data
collected from The Bank of New York Mellon, which currently acts as
the clearing bank for the tri-party repo market, as well as General
Collateral Finance Repo transaction data and data on bilateral
Treasury repo transactions cleared through the FICC’s
delivery-versus-payment service. The NY Federal Reserve notes that
it obtains information from DTCC Solutions LLC, an affiliate of
DTCC.
The NY Federal Reserve currently publishes SOFR daily on its
website. The NY Federal Reserve states on its publication page for
SOFR that use of SOFR is subject to important disclaimers,
limitations and indemnification obligations, including that the NY
Federal Reserve may alter the methods of calculation, publication
schedule, rate revision practices or availability of SOFR at any
time without notice. Information contained in the publication page
for SOFR is not incorporated by reference in, and should not be
considered part of, this pricing supplement.
The USD SOFR ICE Swap Rates
A USD SOFR ICE swap rate for a given maturity is the annual fixed
rate of interest payable on a hypothetical fixed-for-floating U.S.
Dollar interest rate swap transaction with the given maturity. In
such a hypothetical swap transaction, the fixed rate of interest,
payable annually on an actual / 360 basis (i.e., interest accrues
based on the actual number of days elapsed, with a year assumed to
comprise 360 days), is exchangeable for a floating payment stream
based on SOFR (compounded in arrears for twelve months using
standard market conventions), also payable annually on an actual /
360 basis.
Many complex economic factors may influence USD SOFR ICE swap
rates, including:
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the monetary policies of the Federal Reserve Board; |
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current market expectations about future interest rates; |
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current market expectations about inflation; |
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the volatility of the foreign exchange markets; |
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the availability of relevant hedging instruments; |
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supply and demand for overnight U.S. Treasury repurchase
agreements; and |
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general credit and economic conditions in global markets, and
particularly in the United States. |
Because USD SOFR ICE swap rates are market rates and are influenced
by many factors, it is impossible to predict the future value of
any USD SOFR ICE swap rate.
The SOFR CMS Spread
The “SOFR CMS spread” on any day is equal to the 30-year U.S.
Dollar SOFR ICE swap rate (“SOFR CMS30”) minus the 2-year
U.S. Dollar SOFR ICE swap rate (“SOFR CMS2”) on that day. We refer
to each of SOFR CMS30 and SOFR CMS2 as a “USD SOFR ICE swap
rate”.
The relevant contingent rate is based on the SOFR CMS spread, on
not on the absolute level of either SOFR CMS30 or SOFR CMS2. The
relevant contingent rate for any coupon payment date after the
third year following issuance of the securities will depend on the
SOFR CMS spread as of the SOFR CMS spread determination date for
the related accrual period. If the SOFR CMS spread for any SOFR CMS
spread determination date is less than or equal to 0.00%, the
relevant contingent rate for that accrual period will be 0.00% and
you will not receive any coupon payment on the related coupon
payment date.
The SOFR CMS spread is a measure of the difference, or spread,
between two USD SOFR ICE swap rates of different maturities. The
spread between two USD SOFR ICE swap rates of different maturities
may be affected by numerous complex economic factors. It is not
possible to predict whether the spread will be positive or negative
at any time in the future. Investors in the securities are taking
the risk that the spread between SOFR CMS30 and SOFR CMS2 will be
zero or negative, meaning that SOFR CMS30 is equal to or less than
SOFR CMS2.
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Historical Information
The rate for SOFR CMS30 at 11:00 a.m. (New York time) on May 12,
2022 was 2.477%. The rate for SOFR CMS2 at 11:00 a.m. (New York
time) on May 12, 2022 was 2.580%. As a result, the SOFR CMS spread
on May 12, 2022 was -0.103%.
The graph below shows the daily value of the SOFR CMS spread from
November 18, 2021 to May 12, 2022. We obtained the values below
from Bloomberg L.P., without independent verification. You should
not take the historical values of the SOFR CMS spread as an
indication of the future values of the SOFR CMS spread during the
term of the securities. Publication of each USD SOFR ICE swap rate
began on November 8, 2021, and they therefore have a limited
history.
Historical SOFR CMS Spread (%)
November 18, 2021 to May 12, 2022 |
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Information About the Dow
Jones Industrial AverageTM
The Dow Jones Industrial AverageTM is a price-weighted
index rather than a market capitalization-weighted index. The Dow
Jones Industrial AverageTM consists of 30 common stocks
chosen as representative of the broad market of U.S. industry. It
is calculated and maintained by S&P Dow Jones Indices LLC.
Please refer to the section “Equity Index Descriptions—The Dow
Jones Industrial AverageTM” in the accompanying
underlying supplement for additional information.
We have derived all information regarding the Dow Jones Industrial
AverageTM from publicly available information and have
not independently verified any information regarding the Dow Jones
Industrial AverageTM. This pricing supplement relates
only to the securities and not to the Dow Jones Industrial
AverageTM. We make no representation as to the
performance of the Dow Jones Industrial AverageTM over
the term of the securities.
The securities represent obligations of Citigroup Global Markets
Holdings Inc. (guaranteed by Citigroup Inc.) only. The sponsor of
the Dow Jones Industrial AverageTM is not involved in
any way in this offering and has no obligation relating to the
securities or to holders of the securities.
Historical
Information
The closing level of the Dow Jones Industrial AverageTM
on May 13, 2022 was 32,196.66.
The graph below shows the closing level of the Dow Jones Industrial
AverageTM for each day such level was available from
January 3, 2012 to May 13, 2022. We obtained the closing levels
from Bloomberg L.P., without independent verification. You should
not take the historical closing levels of the Dow Jones Industrial
AverageTM as an indication of future performance.
Dow Jones Industrial AverageTM — Historical Closing
Levels
January 3, 2012 to May 13, 2022 |
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Information About the EURO
STOXX® Banks Index
The EURO STOXX® Banks Index includes companies in the
banks supersector within the STOXX® Europe 600 Index,
which tracks companies providing a broad range of financial
services, including retail banking, loans and money transmissions.
The STOXX Europe 600® Supersector indices contain the
600 largest stocks traded on the major exchanges of certain
European countries. The EURO STOXX® Banks Index is
calculated and maintained by STOXX Limited.
Please refer to the section “Equity Index Descriptions— The EURO
STOXX® Banks Index” in the accompanying underlying
supplement for additional information.
We have derived all information regarding the EURO
STOXX® Banks Index from publicly available information
and have not independently verified any information regarding the
EURO STOXX® Banks Index. This pricing supplement relates
only to the securities and not to the EURO STOXX® Banks
Index. We make no representation as to the performance of the EURO
STOXX® Banks Index over the term of the securities.
The securities represent obligations of Citigroup Global Markets
Holdings Inc. (guaranteed by Citigroup Inc.) only. The sponsor of
the EURO STOXX® Banks Index is not involved in any way
in this offering and has no obligation relating to the securities
or to holders of the securities.
Historical
Information
The closing level of the EURO
STOXX® Banks Index on May 13, 2022 was 85.82.
The graph below shows the
closing level of the EURO STOXX® Banks Index for each
day such level was available from January 2, 2012 to May 13, 2022.
We obtained the closing levels from Bloomberg L.P., without
independent verification. You should not take the historical
closing levels of the EURO STOXX® Banks Index as an
indication of future performance.
EURO STOXX® Banks Index
— Historical Closing Levels
January 2, 2012 to May 13, 2022 |
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Information About the S&P 500® Index
The S&P 500® Index consists of the common stocks of
500 issuers selected to provide a performance benchmark for the
large capitalization segment of the U.S. equity markets. It is
calculated and maintained by S&P Dow Jones Indices LLC.
Please refer to the section “Equity Index Descriptions—The S&P
U.S. Indices” in the accompanying underlying supplement for
additional information.
We have derived all information regarding the S&P
500® Index from publicly available information and have
not independently verified any information regarding the S&P
500® Index. This pricing supplement relates only to the
securities and not to the S&P 500® Index. We make no
representation as to the performance of the S&P 500®
Index over the term of the securities.
The securities represent obligations of Citigroup Global Markets
Holdings Inc. (guaranteed by Citigroup Inc.) only. The sponsor of
the S&P 500® Index is not involved in any way in
this offering and has no obligation relating to the securities or
to holders of the securities.
Historical Information
The closing level of the S&P 500® Index on May 13,
2022 was 4,023.89.
The graph below shows the closing level of the S&P
500® Index for each day such level was available from
January 3, 2012 to May 13, 2022. We obtained the closing levels
from Bloomberg L.P., without independent verification. You should
not take the historical closing levels of the S&P
500® Index as an indication of future performance.
S&P 500® Index — Historical Closing Levels
January 3, 2012 to May 13, 2022 |
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United States Federal Tax Considerations
You should read carefully the discussion under “United States
Federal Tax Considerations” and “Risk Factors Relating to the
Securities” in the accompanying product supplement and “Summary
Risk Factors” in this pricing supplement.
Due to the lack of any controlling legal authority, there is
substantial uncertainty regarding the U.S. federal tax consequences
of an investment in the securities. In connection with any
information reporting requirements we may have in respect of the
securities under applicable law, we intend (in the absence of an
administrative determination or judicial ruling to the contrary) to
treat the securities for U.S. federal income tax purposes as
prepaid forward contracts with associated coupon payments that will
be treated as gross income to you at the time received or accrued
in accordance with your regular method of tax accounting. In the
opinion of our counsel, Davis Polk & Wardwell LLP, this
treatment of the securities is reasonable under current law;
however, our counsel has advised us that it is unable to conclude
affirmatively that this treatment is more likely than not to be
upheld, and that alternative treatments are possible. Moreover, our
counsel’s opinion is based on market conditions as of the date of
this preliminary pricing supplement and is subject to confirmation
on the pricing date.
Assuming this treatment of the securities is respected and subject
to the discussion in “United States Federal Tax Considerations” in
the accompanying product supplement, the following U.S. federal
income tax consequences should result under current law:
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Any
coupon payments on the securities should be taxable as ordinary
income to you at the time received or accrued in accordance with
your regular method of accounting for U.S. federal income tax
purposes. |
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Upon a
sale or exchange of a security (including retirement at maturity),
you should recognize capital gain or loss equal to the difference
between the amount realized and your tax basis in the security. For
this purpose, the amount realized does not include any coupon paid
on retirement and may not include sale proceeds attributable to an
accrued coupon, which may be treated as a coupon payment. Such gain
or loss should be long-term capital gain or loss if you held the
security for more than one year. |
We do not plan to request a
ruling from the IRS regarding the treatment of the securities. An
alternative characterization of the securities could materially and
adversely affect the tax consequences of ownership and disposition
of the securities, including the timing and character of income
recognized. In addition, the U.S. Treasury Department and the IRS
have requested comments on various issues regarding the U.S.
federal income tax treatment of “prepaid forward contracts” and
similar financial instruments and have indicated that such
transactions may be the subject of future regulations or other
guidance. Furthermore, members of Congress have proposed
legislative changes to the tax treatment of derivative contracts.
Any legislation, Treasury regulations or other guidance promulgated
after consideration of these issues could materially and adversely
affect the tax consequences of an investment in the securities,
possibly with retroactive effect. You should consult your tax
adviser regarding possible alternative tax treatments of the
securities and potential changes in applicable law.
Withholding Tax on Non-U.S. Holders. Because significant
aspects of the tax treatment of the securities are uncertain,
persons having withholding responsibility in respect of the
securities may withhold on any coupon payment paid to Non-U.S.
Holders (as defined in the accompanying product supplement),
generally at a rate of 30%. To the extent that we have (or an
affiliate of ours has) withholding responsibility in respect of the
securities, we intend to so withhold. In order to claim an
exemption from, or a reduction in, the 30% withholding, you may
need to comply with certification requirements to establish that
you are not a U.S. person and are eligible for such an exemption or
reduction under an applicable tax treaty. You should consult your
tax adviser regarding the tax treatment of the securities,
including the possibility of obtaining a refund of any amounts
withheld and the certification requirement described above.
As discussed under “United
States Federal Tax Considerations—Tax Consequences to Non-U.S.
Holders” in the accompanying product supplement, Section 871(m) of
the Code and Treasury regulations promulgated thereunder (“Section
871(m)”) generally impose a 30% withholding tax on dividend
equivalents paid or deemed paid to Non-U.S. Holders with respect to
certain financial instruments linked to U.S. equities (“U.S.
Underlying Equities”) or indices that include U.S. Underlying
Equities. Section 871(m) generally applies to instruments that
substantially replicate the economic performance of one or more
U.S. Underlying Equities, as determined based on tests set forth in
the applicable Treasury regulations. However, the regulations, as
modified by an IRS notice, exempt financial instruments issued
prior to January 1, 2023 that do not have a “delta” of one. Based
on the terms of the securities and representations provided by us
as of the date of this preliminary pricing supplement, our counsel
is of the opinion that the securities should not be treated as
transactions that have a “delta” of one within the meaning of the
regulations with respect to any U.S. Underlying Equity and,
therefore, should not be subject to withholding tax under Section
871(m). However, the final determination regarding the treatment of
the securities under Section 871(m) will be made as of the pricing
date for the securities, and it is possible that the securities
will be subject to withholding tax under Section 871(m) based on
the circumstances as of that date.
A determination that the
securities are not subject to Section 871(m) is not binding on the
IRS, and the IRS may disagree with this treatment. Moreover,
Section 871(m) is complex and its application may depend on your
particular circumstances, including your other transactions. You
should consult your tax adviser regarding the potential application
of Section 871(m) to the securities.
We will not be required to pay any additional amounts with respect
to amounts withheld.
You should read the section entitled “United States Federal Tax
Considerations” in the accompanying product supplement. The
preceding discussion, when read in combination with that section,
constitutes the full opinion of Davis Polk & Wardwell LLP
regarding the material U.S. federal tax consequences of owning and
disposing of the securities.
You should also consult your tax adviser regarding all aspects
of the U.S. federal income and estate tax consequences of an
investment in the securities and any tax consequences arising under
the laws of any state, local or non-U.S. taxing
jurisdiction.
|
Citigroup Global Markets Holdings
Inc. |
| |
Supplemental Plan of Distribution
CGMI, an affiliate of
Citigroup Global Markets Holdings Inc. and the underwriter of the
sale of the securities, is acting as principal and will receive an
underwriting fee of up to $50.00 for each security sold in this
offering. The actual underwriting fee will be equal to the selling
concession provided to selected dealers, as described in this
paragraph. From this underwriting fee, CGMI will pay selected
dealers not affiliated with CGMI a variable selling concession of
up to $50.00 for each security they sell. For the avoidance of
doubt, the fees and selling concessions described in this pricing
supplement will not be rebated if the securities are redeemed prior
to maturity.
See “Plan of Distribution; Conflicts of Interest” in the
accompanying product supplement and “Plan of Distribution” in each
of the accompanying prospectus supplement and prospectus for
additional information.
Valuation of the Securities
CGMI calculated the estimated value of the securities set forth on
the cover page of this pricing supplement based on proprietary
pricing models. CGMI’s proprietary pricing models generated an
estimated value for the securities by estimating the value of a
hypothetical package of financial instruments that would replicate
the payout on the securities, which consists of a fixed-income bond
(the “bond component”) and one or more derivative instruments
underlying the economic terms of the securities (the “derivative
component”). CGMI calculated the estimated value of the bond
component using a discount rate based on our internal funding rate.
CGMI calculated the estimated value of the derivative component
based on a proprietary derivative-pricing model, which generated a
theoretical price for the instruments that constitute the
derivative component based on various inputs, including the factors
described under “Summary Risk Factors—The value of the securities
prior to maturity will fluctuate based on many unpredictable
factors” in this pricing supplement, but not including our or
Citigroup Inc.’s creditworthiness. These inputs may be
market-observable or may be based on assumptions made by CGMI in
its discretionary judgment.
The estimated value of the securities is a function of the terms of
the securities and the inputs to CGMI’s proprietary pricing models.
As of the date of this preliminary pricing supplement, it is
uncertain what the estimated value of the securities will be on the
pricing date because it is uncertain what the values of the inputs
to CGMI’s proprietary pricing models will be on the pricing
date.
For a period of approximately twelve months following issuance of
the securities, the price, if any, at which CGMI would be willing
to buy the securities from investors, and the value that will be
indicated for the securities on any brokerage account statements
prepared by CGMI or its affiliates (which value CGMI may also
publish through one or more financial information vendors), will
reflect a temporary upward adjustment from the price or value that
would otherwise be determined. This temporary upward adjustment
represents a portion of the hedging profit expected to be realized
by CGMI or its affiliates over the term of the securities. The
amount of this temporary upward adjustment will decline to zero on
a straight-line basis over the twelve-month temporary adjustment
period. However, CGMI is not obligated to buy the securities from
investors at any time. See “Summary Risk Factors—The securities
will not be listed on any securities exchange and you may not be
able to sell them prior to maturity.”
© 2022 Citigroup Global Markets Inc. All rights
reserved. Citi and Citi and Arc Design are trademarks and service
marks of Citigroup Inc. or its affiliates and are used and
registered throughout the world.
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