The information in this preliminary
pricing supplement is not complete and may be changed. This preliminary pricing supplement and the accompanying 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 April
21, 2017
Filed Pursuant to Rule 424(b)(2)
Registration Statement Nos. 333-216372 and
333-216372-01
|
|
Citigroup Global Markets Holdings Inc.
$
|
|
Fixed and Floating Rate Notes due
All Payments Due from Citigroup Global Markets
Holdings Inc.
Fully and Unconditionally Guaranteed by
Citigroup Inc.
|
We will pay a fixed rate of interest at
a rate of 3.73% to 4.39% per annum (to be set on the trade date) quarterly on February , May , August and November of each year,
commencing on August , 2017 to, and including, November , 2019. After November , 2019, interest will be payable quarterly on February
, May , August and November of each year, commencing on February , 2020 to, and including, the stated maturity date (expected
to be between 120 and 123 months after the trade date) at a floating rate equal to the then-applicable 10-year CMS rate, subject
to the minimum interest rate of 0.00% per annum. The notes will mature on the stated maturity date. On the stated maturity date,
you will receive $1,000,
plus
any accrued and unpaid interest, for each $1,000 of the stated principal amount of your notes.
The interest on your notes for each quarterly
interest period commencing on or after November , 2019 will be paid at a rate equal to the then-applicable
10-year CMS rate, determined on the relevant interest determination date, subject to the minimum interest rate.
After
November , 2019, interest payments on the notes will vary and may be as low as 0.00% per annum.
The notes are unsecured senior debt securities
issued by Citigroup Global Markets Holdings Inc. and guaranteed by Citigroup Inc. All payments on the notes are subject to the
credit risk of Citigroup Global Markets Holdings Inc. and Citigroup Inc. If Citigroup Global Markets Holdings Inc. and Citigroup
Inc. default on their obligations, you may not receive any amount due under the notes. The notes will not be listed on any securities
exchange and may have limited or no liquidity.
Investing in the notes involves risks
not associated with an investment in conventional fixed-rate debt securities. See “Summary Risk Factors” beginning
on page PS-5.
|
|
Issue Price
(1)
|
Underwriting Discount
(2)
|
Net Proceeds to Issuer
|
|
Per Note:
|
$1,000.00*
|
$20.00
|
$980.00
|
|
Total:
|
$
|
$
|
$
|
(1) Citigroup
Global Markets Holdings Inc. currently expects that the estimated value of the notes on the trade date will be between $960.00
and $980.00 per note, which will be less than the issue price. The estimated value of the notes is based on proprietary pricing
models of Citigroup Global Markets Inc. (“CGMI”) 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 notes from you at any time after issuance. See “Valuation of the Notes” in this pricing supplement.
(2) CGMI, an
affiliate of the issuer, is the underwriter for the offering of the notes and is acting as principal. The total underwriting discount
in the table above assumes that the underwriter receives an underwriting discount for each note sold in this offering. For more
information on the distribution of the notes, see “Summary Information—Key Terms—Supplemental Plan of Distribution”
in this pricing supplement. In addition to the underwriting discount, CGMI and its affiliates may profit from expected hedging
activity related to this offering, even if the value of the notes declines. See “Use of Proceeds and Hedging” in the
accompanying prospectus.
* The issue
price will be between $980.00 and $1,000.00 for investors in certain fee-based advisory accounts, reflecting a foregone underwriting
discount with respect to such notes. Please see “Supplemental plan of distribution” on page PS-3 of this pricing supplement.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of the notes or determined that this pricing supplement and the
accompanying prospectus supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The notes 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.
The notes are part of the Medium-Term Senior
Notes, Series N of Citigroup Global Markets Holdings Inc. This pricing supplement is a supplement to the documents listed below
and should be read together with such documents, which are available at the following hyperlink:
Citigroup Global Markets Inc.
Pricing Supplement No. 2017—USNCH0502 dated
----------
,
2017
The issue price, underwriting discount
and net proceeds listed above relate to the notes we sell initially. We may decide to sell additional notes after the date of this
pricing supplement, at issue prices and with underwriting discounts and net proceeds that differ from the amounts set forth above.
The return on your investment in notes will depend in part on the issue price you pay for such notes.
CGMI may use this pricing supplement in
the initial sale of the notes. In addition, CGMI or any other affiliate of Citigroup Inc. may use this pricing supplement in a
market-making transaction in a note after its initial sale.
SUMMARY INFORMATION
|
The description of the notes in this pricing supplement
supplements, and, to the extent inconsistent with, replaces the general terms of the notes set forth in the accompanying prospectus
supplement and prospectus. The accompanying prospectus supplement and prospectus contain important disclosures that are not repeated
in this pricing supplement. It is important that you read the accompanying prospectus supplement and prospectus together with this
pricing supplement before deciding whether to invest in the notes.
The notes are senior unsecured debt securities
issued by Citigroup Global Markets Holdings Inc. under the senior debt indenture described in the accompanying prospectus supplement
and prospectus, the payments on which are fully and unconditionally guaranteed by Citigroup Inc. The notes will constitute part
of the senior debt of Citigroup Global Markets Holdings Inc. and will rank equally with all other unsecured and unsubordinated
debt of Citigroup Global Markets Holdings Inc. The guarantee of payments due on the notes will constitute part of the senior indebtedness
of Citigroup Inc. and will rank on an equal basis with all other unsecured debt of Citigroup Inc. other than subordinated debt.
|
Key Terms
Issuer:
Citigroup Global Markets Holdings Inc., a wholly
owned subsidiary of Citigroup Inc.
Guarantee:
all payments due on the notes are fully and
unconditionally guaranteed by Citigroup Inc.
Stated principal amount:
each note will have a stated
principal amount of $1,000
Purchase at amount other than the stated principal amount:
the amount we will pay you at the stated maturity date for your notes will not be adjusted based on the issue price you pay for
your notes, so if you acquire notes at a premium (or discount) to the stated principal amount and hold them to the stated maturity
date, it could affect your investment in a number of ways. The return on your investment in such notes will be lower (or higher)
than it would have been had you purchased the notes at the stated principal amount. See “Summary Risk Factors — If
You Purchase Your Notes at a Premium to the Stated Principal Amount, the Return on Your Investment Will Be Lower Than the Return
on Notes Purchased at the Stated Principal Amount and the Impact of Certain Key Terms of the Notes Will be Negatively Affected”
on page PS-7 of this pricing supplement.
Payment at maturity:
on the maturity date, for each $1,000
stated principal amount of notes you then hold, we will pay you an amount in cash equal to $1,000
plus
accrued and unpaid
interest
Trade date:
Original issue date (settlement date) (to be set on the trade
date):
expected to be the fifth scheduled business day following the trade date. See “Supplemental plan of distribution”
below for additional information.
Maturity date (to be set on the trade date):
expected
to be between 120 and 123 months after the trade date. If the maturity date is not a business day, then the payment required to
be made on the maturity date will be made on the next succeeding business day with the same force and effect as if it had been
made on the maturity date. No additional interest will accrue as a result of delayed payment.
Fixed interest rate:
for the fixed rate interest periods,
interest on the notes will be paid at a rate of 3.73% to 4.39% per annum (to be set on the trade date)
Fixed rate interest payment dates (to be set on the trade
date):
expected to be February , May , August and November
of each year, commencing on August , 2017 to, and including, November , 2019, subject
to adjustment as described under “Key Terms — Business day convention” below.
Fixed rate interest periods:
quarterly; the periods from
and including a fixed rate interest payment date (or the original issue date, in the case of the first fixed rate interest period)
to but excluding the following fixed rate interest payment date
Floating interest rate:
for the floating rate interest
periods commencing on or after November , 2019 to, but excluding, the stated maturity date, a rate per
annum equal to the base rate, determined on the relevant interest determination date, subject to the minimum interest rate ,
subject to adjustment as described under “Key Terms — Business day convention” below.
Base rate for the floating rate interest periods:
On any
interest determination date, the 10-year Constant Maturity Swap (“CMS”) rate, as published on Reuters page “ICESWAP1”
at 11:00 a.m. (New York City time) on that date of determination. See “Determination of the 10-Year CMS Rate” and “Discontinuance
of the 10-Year CMS Rate” on page PS-8 for further information.
Minimum interest rate:
0.00% per annum
Floating rate interest payment dates (to be set on the trade
date):
expected to be February , May , August and November
of each year, commencing on February , 2020, to, and including, the stated maturity date.
Floating rate interest periods:
quarterly; the periods
from and including a floating rate interest payment date (or the final fixed rate interest payment date, in the case of the first
floating rate interest period) to but excluding the next succeeding floating rate interest payment date (or the stated maturity
date, in the case of the final floating rate interest period)
Interest determination dates:
for each floating rate interest
period, the second U.S. government securities business day prior to the first day of that floating rate interest period
U.S. government securities business day:
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
Business day convention:
following unadjusted, which means
that if any fixed rate interest payment date or floating rate interest payment date is not a business day, then the payment required
to be made on that fixed rate interest payment date or floating rate interest payment date, as applicable, will be made on the
next succeeding business day with the same force and effect as if it had been made on that fixed rate interest payment date or
floating rate interest payment date, as applicable. No additional interest will accrue as a result of delayed payment.
Day count convention:
30/360 unadjusted; the amount of
interest you receive on each interest payment date for each note you hold on the regular record date for such interest payment
date will be equal to (i) $1,000
times
the applicable interest rate per annum
divided by
(ii) 4.
Regular record dates:
interest will be payable on each
fixed rate interest payment date and floating rate interest payment date to the holders of record of the notes at the close of
business on the business day immediately preceding the relevant interest payment date, except that the final interest payment will
be made to the persons who hold the notes on the maturity date.
No listing:
the notes will not be listed on any securities
exchange or interdealer quotation system
No redemption:
the notes will not be subject to redemption
before maturity
Supplemental plan of distribution:
the terms and conditions
set forth in the Amended and Restated Global Selling Agency Agreement dated April 7, 2017 among Citigroup Global Markets Holdings
Inc., Citigroup Inc. and the agents named therein, including CGMI, govern the sale and purchase of the notes.
Citigroup Global Markets Holdings Inc. expects to sell to CGMI,
and CGMI expects to purchase from Citigroup Global Markets Holdings Inc., the aggregate stated principal amount of the offered
notes specified on the front cover of this pricing supplement. CGMI proposes initially to offer the notes to the public at the
issue price set forth on the cover page of this pricing supplement, and to certain unaffiliated securities dealers at such price
less a concession not in excess of 2.00% of the stated principal amount. The issue price for notes purchased by certain fee-based
advisory accounts will be between 98.00% and 100.00% of the stated principal amount, which reflects a foregone underwriting discount
with respect to such notes (i.e., the underwriting discount specified on the cover of this pricing supplement with respect to such
notes is 0.00%). In addition to the underwriting discount, CGMI and its affiliates may profit from expected hedging activity related
to this offering, even if the value of the notes declines. See “Use of Proceeds and Hedging” in the accompanying prospectus.
CGMI is an affiliate of ours. Accordingly, this offering will
conform with the requirements addressing conflicts of interest when distributing the securities of an affiliate set forth in Rule
5121 of the Financial Industry Regulatory Authority. Client accounts over which Citigroup Inc. or its subsidiaries have investment
discretion will not be permitted to purchase the notes, either directly or indirectly, without the prior written consent of the
client.
Secondary market sales of securities typically settle three business
days after the date on which the parties agree to the sale. Because the settlement date for the notes is more than three business
days after the trade date, investors who wish to sell the notes at any time prior to the third business day preceding the original
issue date will be required to specify an alternative settlement date for the secondary market sale to prevent a failed settlement.
Investors should consult their own investment advisors in this regard.
See “Plan of Distribution” in each of the accompanying
prospectus supplement and prospectus for additional information.
A portion of the net proceeds from the sale of the notes will
be used to hedge our obligations under the notes. We expect to hedge our obligations under the notes through CGMI or other of our
affiliates, or through a dealer participating in this offering or its affiliates. CGMI or such other of our affiliates or such
dealer or its affiliates may profit from this expected hedging activity even if the value of the notes declines. In order to hedge
its obligations under the notes, Citigroup Global Markets Holdings Inc. expects to enter into one or more swaps or other derivatives
transactions with one or more of its affiliates. You should refer to the sections “Summary Risk Factors—The estimated
value of the notes on the trade date, based on CGMI’s proprietary pricing models and our internal funding rate, will be less
than the issue price,” and the section “Use of Proceeds and Hedging” in the accompanying prospectus.
Calculation agent:
Citibank, N.A., an affiliate of Citigroup
Global Markets Holdings Inc., will serve as calculation agent for the notes. All determinations made by the calculation agent will
be at the sole discretion of the calculation agent and will, in the absence of manifest error, be conclusive for all purposes and
binding on Citigroup Global Markets Holdings Inc., Citigroup Inc. and the holders of the notes. Citibank, N.A. is obligated to
carry out its duties and functions as calculation agent in good faith and using its reasonable judgment.
CUSIP:
17324CHQ2
ISIN:
US17324CHQ24
HYPOTHETICAL EXAMPLES
The table below is provided for purposes of illustration only.
It should not be taken as an indication or prediction of future investment results and is intended merely to illustrate the calculation
of the amount of interest accrued during each floating rate interest period.
The table below is based on 10-year CMS rates that are entirely
hypothetical; no one can predict what the 10-year CMS rate will be on any interest determination date with respect to the floating
rate interest periods, and no one can predict the interest that will accrue, if any, on the notes in any floating rate interest
period.
The information in the table below illustrates how the interest
rate at which interest will accrue on each day included in each floating rate interest period will be calculated, subject to the
key terms and assumptions below. If you sell your notes in the secondary market prior to the maturity date, your return will depend
upon the value of your notes at the time of sale, which may be affected by a number of factors that are not reflected in the table
below such as interest rates generally, the volatility of the 10-year CMS rate and our and Citigroup Inc.’s creditworthiness.
Please read “Summary Risk Factors—The Value of the Notes Prior to Maturity Will Fluctuate Based on Many Unpredictable
Factors” in this pricing supplement. It is likely that any secondary market price for the notes will be less than the issue
price.
The information in the table also reflects the key terms and
assumptions in the box below.
|
Key Terms and Assumptions
|
|
Stated principal amount
|
$1,000
|
|
Minimum interest rate
|
0.00% per annum
|
The actual 10-year CMS rates during the floating rate interest
periods, as well as the interest payable on each floating rate interest payment date, may bear little relation to the hypothetical
examples shown below or to the historical 10-year CMS rates shown elsewhere in this pricing supplement. For information about the
10-year CMS rates during recent periods, see “Historical Information on the 10-Year CMS Rate” on page PS-9. Before
investing in the offered notes, you should consult publicly available information to determine the 10-year CMS rates between the
date of this pricing supplement and the date of your purchase of the offered notes.
The percentages in the left column of the table below represent
hypothetical values of the 10-year CMS rate on the interest determination date for a given floating rate interest period. The percentages
in the right column represent the hypothetical interest rate per annum that would be payable on a given floating rate interest
payment date, based on the corresponding hypothetical 10-year CMS rate.
|
Hypothetical 10-Year CMS Rate
|
Hypothetical Interest Payable Per Annum on a Floating Rate Interest Payment Date
|
|
-3.00%
|
0.00%*
|
|
-2.00%
|
0.00%*
|
|
-1.00%
|
0.00%*
|
|
0.00%
|
0.00%
|
|
0.25%
|
0.25%
|
|
0.50%
|
0.50%
|
|
0.75%
|
0.75%
|
|
1.00%
|
1.00%
|
|
2.00%
|
2.00%
|
|
3.00%
|
3.00%
|
|
4.00%
|
4.00%
|
|
5.00%
|
5.00%
|
*The minimum interest rate per annum is 0.00% for
any floating rate interest payment date.
During any fixed rate interest period, the interest rate payable
on the notes will in no event exceed the fixed interest rate.
|
We cannot predict the actual 10-year CMS rate or what the value of your notes will be on any particular day, nor can we predict the relationship between the 10-year CMS rate and the value of your notes at any time prior to the maturity date. The actual interest payments that a holder of the offered notes will receive, if any, on each floating rate interest payment date and the total return on the offered notes will depend on the actual 10-year CMS rates determined by the calculation agent over the term of the notes. Consequently, the interest amount to be paid in respect of your notes, if any, on each floating rate interest payment date may be very different from the information reflected in the table above.
|
SUMMARY RISK FACTORS
|
The following is a summary of certain key risk factors for investors in the notes. You should carefully read this summary and 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.
|
After the First 2.5 Years, the Notes
Will Pay Interest at a Floating Rate that May Be as Low as 0.00% on One or More Floating Rate Interest Payment Dates
The rate at which the notes will bear interest during each quarterly
interest period after the first 2.5 years will depend on the 10-year CMS rate on the interest determination date for that floating
rate interest period. As a result, the interest payable on the notes will vary with fluctuations in the 10-year CMS rate, subject
to the minimum interest rate of 0.00% per annum. It is impossible to predict whether the 10-year CMS rate will rise or fall or
the amount of interest payable on the notes. After the first 2.5 years, you may receive no interest for extended periods of time
or even throughout the remaining term of the notes.
An Investment in the Notes May Be More
Risky Than an Investment in Notes with a Shorter Term
The notes have a term of between 120 and 123 months. By purchasing
notes with a longer term, you will bear greater exposure to fluctuations in market interest rates than if you purchased a note
with a shorter term. In particular, if the 10-year CMS rate does not increase from its current level, you may be holding a long-dated
security that pays an interest rate that is less than that which would be payable on a conventional fixed-rate, non-callable debt
security of Citigroup Global Markets Holdings Inc. (guaranteed by Citigroup Inc.) of comparable maturity. In addition, if you tried
to sell your notes at such time, the value of your notes in any secondary market transaction would also be adversely affected.
The Notes Are Subject to the Credit
Risk of Citigroup Global Markets Holdings Inc. and Citigroup Inc., and Any Actual or Perceived Changes to the Creditworthiness
of Either Entity May Adversely Affect the Value of the Notes
You are subject to the credit risk of Citigroup Global Markets
Holdings Inc. and Citigroup Inc. If Citigroup Global Markets Holdings Inc. defaults on its obligations under the notes and Citigroup
Inc. defaults on its guarantee obligations, your investment would be at risk and you could lose some or all of your investment.
As a result, the value of the notes will be affected by changes in the market’s view of the creditworthiness of Citigroup
Global Markets Holdings Inc. or Citigroup Inc. Any decline or anticipated decline in the credit ratings of either entity, or any
increase or anticipated increase in the credit spreads of either entity, is likely to adversely affect the value of the notes.
The Amount of Interest Payable on Your
Notes Will Not Be Affected by the 10-Year CMS Rate on Any Day Other Than an Interest Determination Date
For each interest period after the first 2.5 years, the amount
of interest payable on each floating rate interest payment date is calculated based on the 10-year CMS rate on the applicable interest
determination date. Although the actual 10-year CMS rate on a floating rate interest payment date or at other times during a floating
rate interest period may be higher than the 10-year CMS rate on the applicable interest determination date, you will not benefit
from the 10-year CMS rate at any time other than on the interest determination date for such floating rate interest period.
The Historical Levels
of the 10-Year CMS Rate Are Not an Indication of the Future Levels of the
10-Year CMS Rate
In the past, the level of the 10-year CMS rate has experienced
significant fluctuations. You should note that historical levels, fluctuations and trends of the 10-year CMS rate are not necessarily
indicative of future levels. Any historical upward or downward trend in the 10-year CMS rate is not an indication that the 10-year
CMS rate is more or less likely to increase or decrease at any time during an interest period, and you should not take the historical
levels of the 10-year CMS rate as an indication of its future performance.
You Will Be Entitled to Receive the
Full Stated Principal Amount of Your Notes, Subject to the Credit Risk of Citigroup Global Markets Holdings Inc. and Citigroup
Inc., Only If You Hold the Notes to Maturity
Because the value of the notes may fluctuate, if you are able
to sell your notes in the secondary market prior to maturity, you may receive less than the stated principal amount.
The Notes Will Not Be Listed on a Securities
Exchange and You May Not Be Able to Sell Them Prior to Maturity
The notes will not be listed on any securities exchange. Therefore,
there may be little or no secondary market for the notes. CGMI currently intends to make a secondary market in relation to the
notes and to provide an indicative bid price for the notes on a daily basis. Any indicative bid price for the notes 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 notes 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 notes because it is likely that CGMI will be the only broker-dealer that
is willing to buy your notes prior to maturity. Accordingly, an investor must be prepared to hold the notes until maturity.
The Estimated Value of the Notes on
the Trade 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 notes that are included in the issue price. These costs include (i) the selling concessions
paid in connection with the offering of the notes, (ii) hedging and other costs incurred by us and our affiliates in connection
with the offering of the notes 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 our obligations under the notes. These costs adversely affect the economic terms of the
notes because, if they were lower, the economic terms of the notes would be more favorable to you. The economic terms of the notes
are also likely to be adversely affected by the use of our internal funding rate, rather than our secondary market rate,
to price the notes. See “The Estimated Value of the Notes
Would Be Lower if It Were Calculated Based on Our Secondary Market Rate” below.
The Estimated Value of the Notes 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 10-year CMS rate and interest rates generally. 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 notes. Moreover, the estimated value of the notes set forth on the cover page of this pricing supplement may differ
from the value that we or our affiliates may determine for the notes for other purposes, including for accounting purposes. You
should not invest in the notes because of the estimated value of the notes. Instead, you should be willing to hold the notes to
maturity irrespective of the initial estimated value.
The Estimated Value of the Notes Would
Be Lower if It Were Calculated Based on Our Secondary Market Rate
The estimated value of the notes 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 notes. 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 notes for purposes of any purchases of the notes 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 notes, 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 rate at which interest is payable on the notes.
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 notes, 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 notes prior to maturity.
The Estimated Value of the Notes Is
Not an Indication of the Price, if Any, at Which CGMI or Any Other Person May Be Willing to Buy the Notes From You in the Secondary
Market
Any such secondary market price will fluctuate over the term
of the notes 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 notes 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 notes than if our internal funding rate were used. In
addition, any secondary market price for the notes will be reduced by a bid-ask spread, which may vary depending on the aggregate
stated principal amount of the notes 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 notes will be less than the issue price.
The Value of the Notes Prior to Maturity
Will Fluctuate Based on Many Unpredictable Factors
The value of your notes prior to maturity will fluctuate based
on the level and volatility of the 10-year CMS rate, interest and yield rates in the market generally, the time remaining to maturity
of the notes and our and Citigroup Inc.’s creditworthiness, as reflected in our secondary market rate. Changes in the level
of the 10-year CMS rate may not result in a comparable change in the value of your notes. You should understand that the value
of your notes at any time prior to maturity may be significantly less than the issue price. A number of factors, many of which
are beyond our control, will influence the market value of your notes, including:
|
|
·
|
the volatility – i.e., the frequency and magnitude of changes
– in the level of the 10-year CMS rate;
|
|
|
·
|
the expected future performance of the 10-year CMS rate;
|
|
|
·
|
economic, financial, regulatory, political, military and other events
that affect the level of the 10-year CMS rate generally;
|
|
|
·
|
interest rate and yield rates in the market;
|
|
|
·
|
the time remaining until your notes mature; and
|
|
|
·
|
the creditworthiness of Citigroup Global Markets Holdings Inc. and
Citigroup Inc., whether actual or perceived, and including actual or anticipated upgrades or downgrades in the credit ratings or
changes in other credit measures of Citigroup Global Markets Holdings Inc. and Citigroup Inc.
|
These factors, and many other factors, will influence the price
you will receive if you sell your notes before maturity, including the price you may receive for your notes in any market making
transaction. If you sell your notes before maturity, you may receive less than the face amount of your notes.
You cannot predict the future performance of the 10-year CMS
rate based on its historical performance. The actual performance of the 10-year CMS rate over the life of the offered notes may
bear little or no relation to the historical levels of the 10-year CMS rate or to the hypothetical examples shown elsewhere in
this pricing supplement.
If the 10-Year CMS Rate Changes, the
Market Value of Your Notes May Not Change in the Same Manner
Your notes
may trade quite differently from the performance of the 10-year CMS rate. Changes in the 10-year CMS rate may not result in a comparable
change in the market value of your notes. We discuss some of the reasons for this disparity under “— The Value of the
Notes Prior to Maturity Will Fluctuate Based on Many Unpredictable Factors” above.
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 Notes” in this pricing supplement.
Our Offering of the Notes Does Not Constitute
a Recommendation to Invest in an Instrument Linked to the 10-Year CMS Rate
You should
not take our offering of the notes as an expression of our views about how the 10-year CMS rate will perform in the future or as
a recommendation to invest in any instrument linked to the 10-year CMS rate, including the notes. As we are part of a global financial
institution, our affiliates may, and often do, have positions (including short positions), and may publish research or express
opinions, that in each case conflict with an investment in the notes. You should undertake an independent determination of whether
an investment in the notes is suitable for you in light of your specific investment objectives, risk tolerance and financial resources.
The Way the 10-Year CMS Rate is Calculated
May Change in the Future, Which Could Adversely Affect the Value of the Notes
The publisher
of the 10-year CMS rate may change the method by which it calculates the 10-year CMS rate. Changes in the way the 10-year CMS rate
is calculated could reduce the level of the 10-year CMS rate, which could reduce the amount of one or more interest payments to
you and the value of your notes.
Hedging and Other Trading Activities
By Our Affiliates May Affect the Determination of the 10-Year CMS Rate
CMS rates are determined based on tradable quotes for U.S. dollar
fixed-for-floating interest rate swaps of the relevant maturities sourced from electronic trading venues. Our affiliates
may engage in trading activities on these electronic trading venues, in order to hedge our obligations under the notes, as part
of their general business activities or otherwise. These trading activities could affect the level of the 10-year CMS
rate in a way that has a negative effect on the interest rate payable under the notes. They could also result in substantial
returns for our affiliates while the value of the notes declines. In engaging in these trading activities, our affiliates
will have no obligation to consider your interests as an investor in the notes. In addition, if the securities dealer from which
you purchase notes is to conduct hedging activities in connection with the notes, that securities dealer may otherwise profit in
connection with such hedging activities and such profit, if any, will be in addition to the compensation that the securities dealer
receives for the sale of the notes to you. You should be aware that the potential to earn fees in connection with hedging activities
may create a further incentive for the securities dealer to sell the notes to you in addition to the compensation they would receive
for the sale of the notes.
The Calculation Agent, Which Is an Affiliate
of Ours, Will Make Important Determinations With Respect to the Notes
Citibank, N.A., the calculation agent for the notes, is an affiliate
of ours. As calculation agent, Citibank, N.A. will determine, among other things, each 10-year CMS rate and will calculate the
related interest rate and payment to you on each interest payment date. Any of these determinations or calculations made by Citibank,
N.A. in its capacity as calculation agent, including with respect to the calculation of the level of the 10-year CMS rate in the
event of the unavailability of the level of the 10-year CMS rate and the selection of a successor 10-year CMS rate if the 10-year
CMS rate is discontinued, may adversely affect the amount of one or more interest payments to you.
We May Sell an Additional Aggregate
Stated Principal Amount of the Notes at a Different Issue Price
At our sole option, we may decide to sell an additional aggregate
stated principal amount of the notes subsequent to the date of this pricing supplement. The issue price of the notes in the subsequent
sale may differ substantially (higher or lower) from the original issue price you paid as provided on the cover of this pricing
supplement.
If You Purchase Your Notes at a Premium
to the Stated Principal Amount, the Return on Your Investment Will Be Lower Than the Return on Notes Purchased at the Stated Principal
Amount and the Impact of Certain Key Terms of the Notes Will be Negatively Affected
The amount we pay you at the stated maturity date will not be
adjusted based on the issue price you pay for the notes. If you purchase notes at a price that differs from the stated principal
amount of the notes, then the return on your investment in such notes held to the stated maturity date will differ from, and may
be substantially less than, the return on notes purchased at the stated principal amount. If you purchase your notes at a premium
to the stated principal amount and hold them to the stated maturity date, the return on your investment in the notes will be lower
than it would have been had you purchased the notes at the stated principal amount or a discount to the stated principal amount.
DETERMINATION OF THE 10-YEAR CMS RATE
The 10-year CMS rate on any interest determination date is the
rate for U.S. dollar interest rate swaps with a 10-year maturity appearing on Reuters page “ICESWAP1” (or any successor
page as determined by the calculation agent) at 11:00 a.m. (New York City time) on that interest determination date.
If, however, the 10-year CMS rate is not published on
Reuters page “ICESWAP1” (or any successor page as determined by the calculation agent) on that interest
determination date, then the calculation agent will request mid-market semi-annual swap rate quotations from the principal
New York City office of five leading swap dealers in the New York City interbank market (the “reference banks”)
at approximately 11:00 a.m. (New York City time) on that day. For this purpose, the mid-market semi-annual swap rate means
the mean of the bid and offered rates for the semi-annual fixed leg, calculated on a 30/360 day count basis, of a
fixed-for-floating U.S. dollar interest rate swap transaction with a 10-year maturity, commencing on that day
and in a representative amount with an acknowledged dealer of good credit in the swap market, where the floating
leg, calculated on an actual/360 day count basis, is equivalent to U.S. dollar LIBOR with a designated maturity of three
months. If at least three quotations are provided, the rate for the 10-year CMS rate for that day will be the arithmetic mean
of the quotations, eliminating the highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest). If fewer than three quotations are provided
as requested, the 10-year CMS rate will be determined by the calculation agent in good faith and using its
reasonable judgment.
The 10-year CMS rate is calculated by ICE Benchmark Administration
Limited based on tradable quotes for U.S. dollar fixed-for-floating interest rate swaps with a 10-year maturity that are sourced
from electronic trading venues.
The provisions set forth in this section “—Determination
of the 10-Year CMS Rate” are subject to the discussion in “Discontinuance of the 10-Year CMS rate” below.
DISCONTINUANCE OF THE 10-YEAR CMS RATE
If the calculation and publication of the 10-year CMS 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 10-year CMS rate, and the calculation agent may deem that rate
(the “successor CMS rate”) to be the 10-year CMS rate. Upon the selection of any successor CMS rate by the calculation
agent pursuant to this paragraph, references in this pricing supplement to the original 10-year CMS rate will no longer be deemed
to refer to the original 10-year CMS rate and will be deemed instead to refer to that successor CMS rate for all purposes. In such
event, the calculation agent will make such adjustments, if any, to any level of the 10-year CMS rate that is used for purposes
of the notes as it determines are appropriate in the circumstances. Upon any selection by the calculation agent of a successor
CMS rate, the calculation agent will cause notice to be furnished to us and the trustee.
If the calculation and publication of the 10-year CMS rate is
permanently canceled and no successor CMS rate is chosen as described above, then the calculation agent will calculate the level
of the 10-year CMS rate on each subsequent date of determination in good faith and using its reasonable judgment. Such level, as
calculated by the calculation agent, will be the relevant rate for the 10-year CMS rate for all purposes.
Notwithstanding these alternative arrangements, the cancellation
of the 10-year CMS rate may adversely affect interest payments on, and the value of, the notes.
HISTORICAL INFORMATION ON THE 10-YEAR
CMS RATE
The 10-year CMS rate has fluctuated in the past and may, in the
future, experience significant fluctuations. Any historical upward or downward trend in the 10-year CMS rate during
the period shown below is not an indication that the 10-year CMS rate is more or less likely to increase or decrease at any time
during the life of your notes.
You should not take the historical levels of the 10-year CMS
rate as an indication of the future performance of the 10-year CMS rate.
We cannot give you any assurance that the future levels
of the 10-year CMS rate will result in your receiving a return on your notes that is greater than the return you would have realized
if you invested in a debt security of Citigroup Global Markets Holdings Inc. (guaranteed by Citigroup Inc.) of comparable maturity
that bears interest at a prevailing market rate.
Neither we nor any of our affiliates make any representation
to you as to the performance of the 10-year CMS rate. The actual performance of the 10-year CMS rate over the life of
the notes, as well as the interest payable, may bear little relation to the historical levels shown below.
The following graph
shows the published daily rate for the 10-year CMS rate in the period from January 2, 2007 through April 20, 2017. The
historical 10-year CMS rate should not be taken as an indication of the future performance of the 10-year CMS rate. The rate for
the 10-year CMS rate on April 20, 2017, was 2.204% per annum.
UNITED STATES FEDERAL TAX CONSIDERATIONS
You should read the section entitled “United States
Federal Tax Considerations” in the accompanying prospectus 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 notes.
You should also consult your tax adviser regarding all aspects
of the U.S. federal tax consequences of an investment in the notes and any tax consequences arising under the laws of any state,
local or non-U.S. taxing jurisdiction.
VALUATION OF THE NOTES
CGMI calculated the estimated value of the notes 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 notes by estimating the value of a hypothetical package of financial instruments that would replicate
the payout on the notes, which consists of a fixed-income bond (the “bond component”) and one or more derivative instruments
underlying the economic terms of the notes (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 Notes 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 notes is a function of the terms of
the notes and the inputs to CGMI’s proprietary pricing models. The range for the estimated value of the notes set forth on
the cover page of this preliminary pricing supplement reflects terms of the notes that have not yet been fixed as well as uncertainty
on the date of this preliminary pricing supplement about the inputs to CGMI’s proprietary pricing models on the trade date.
For a period of approximately six months following issuance of
the notes, the price, if any, at which CGMI would be willing to buy the notes from investors, and the value that will be indicated
for the notes 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 notes. The amount of this temporary upward adjustment will decline to zero on a straight-line basis
over the six-month temporary adjustment period. However, CGMI is not obligated to buy the notes from investors at any time. See
“Summary Risk Factors — The Notes Will Not Be Listed on a Securities Exchange and You May Not Be Able to Sell Them
Prior to Maturity.”
© 2017 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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