Citigroup Inc. (C) has raised its estimates of long-term debts for full year 2010, according to a recent second quarter 2010 results filing with the Securities and Exchange Commission. This comes as part of Citi’s efforts to strengthen its structural liquidity and extend the duration of liabilities that support its businesses.
For full year 2010, Citi currently expects to issue approximately $18 billion to $21 billion in long-term debt. This is $3 billion to $6 billion above the prior expectations.
The projected issuance of $18 billion to $21 billion is lower than the $35 billion of expected maturities during the year. The remaining balance would have to be financed through the company’s strategic capital management initiatives.
However, Citi will continue to review and adjust its funding and liquidity requirements for the remaining year, considering a number of factors including its market environment and the regulatory needs.
Last week, Citi sold $3 billion of notes. The company conducted the sale in two parts. The first tranche was $2.25 billion of new notes due August 9, 2020, with a coupon rate of 5.375%. The second tranche was of $750 million, consisting of the reopening of notes due May 19, 2015, and carrying a coupon rate of 4.75%. This second tranche exceeded the initial planned size of $500 million. Citi would use the proceeds for general corporate purposes.
In addition to Citi, PNC Financial Services Group Inc.’s (PNC) subsidiary, PNC Funding Corp., has also raised $750 million by selling senior notes last week.
Citi is focused on strengthening its balance sheet and has implemented several restructuring measures. However, we also believe that the shrinking of its business through assets sales and the CARD Act will pose challenges. Yet its core business, Citicorp, remains attractive. Its International consumer business also has good growth momentum. An economic rebound would help it to witness a further improvement in credit quality.
Citi is currently rated as Zacks #3 Rank (Hold), implying no clear directional pressure on the stock over the next one to three months. The stock is also rated Neutral in the long term.