Citi plans 10 series of ETNs linked to VelocityShares currency indexes

By Angela McDaniels

Tacoma, Wash., Dec. 11 – Citigroup Global Markets Holdings Inc. plans to price 10 series of exchange-traded notes due Dec. 15, 2032 each linked to a different VelocityShares Daily 4X Long currency index, according to a 424B2 filing with the Securities and Exchange Commission.

The notes will be guaranteed by Citigroup Inc.

The issues will include the following:

• ETNs linked to the VelocityShares Daily 4X Long USD vs. JPY index with the ticker symbol “DJPY” and Cusip number 17326E654;

• ETNs linked to the VelocityShares Daily 4X Long USD vs. EUR index with the ticker symbol “DEUR” and Cusip number 17326E571;

• ETNs linked to the VelocityShares Daily 4X Long USD vs. GBP index with the ticker symbol “DGBP” and Cusip number 17326E464;

• ETNs linked to the VelocityShares Daily 4X Long USD vs. CHF index with the ticker symbol “DCHF” and Cusip number 17326E704;

• ETNs linked to the VelocityShares Daily 4X Long USD vs. AUD index with the ticker symbol “DAUD” and Cusip number 17326E605;

• ETNs linked to the VelocityShares Daily 4X Long JPY vs. USD index with the ticker symbol “UJPY” and Cusip number 17326E662;

• ETNs linked to the VelocityShares Daily 4X Long EUR vs. USD index with the ticker symbol “UEUR” and Cusip number 17326E480;

• ETNs linked to the VelocityShares Daily 4X Long GBP vs. USD index with the ticker symbol “UGBP” and Cusip number 17326E159;

• ETNs linked to the VelocityShares Daily 4X Long CHF vs. USD index with the ticker symbol “UCHF” and Cusip number 17326E233; and

• ETNs linked to the VelocityShares Daily 4X Long AUD vs. USD index with the ticker symbol “UAUD” and Cusip number 17326E647.

The ETNs will be listed on the NYSE Arca.

The issuer will offer up to $100 million principal amount of each series of ETNs. The inception date is Dec. 12. As of Dec. 15, the original issue date, there will be $4 million principal amount of each series of ETNs outstanding, all of which will initially be held by Citigroup Global Markets Inc. and may be sold to investors or dealers from time to time.

Each index is designed to provide 4 times leveraged exposure, reset daily, to changes in the spot exchange rate between an underlying pair of currencies consisting of the U.S. dollar and a foreign currency. Each index provides long exposure to one currency in the underlying currency pair relative to the other currency. The daily performance of each index will be determined not only by changes in the spot exchange rate between the underlying currencies but also by differences in overnight interest rates between the two currencies and by bid-ask spreads.

The issuer said that because of the nature of daily compounding leveraged instruments such as the ETNs, the amount payable at maturity or upon earlier redemption or acceleration of the ETNs is likely to be significantly less than the stated principal amount of the ETNs.

“In almost any potential scenario, the long-term performance of each series of ETNs is likely to be negative, regardless of the performance of the underlying currency pair, and we do not intend or expect any investor to hold the ETNs from inception to maturity,” the filing said.

Citigroup Global Markets is the agent. It is expected to charge to purchasers a creation fee of up to 0.05% times the indicative value at which it prices the sale, provided however that it may from time to time increase or decrease the creation fee. In exchange for providing certain services relating to the distribution of the ETNs, the agent may receive a portion of the daily investor fee.

Janus Distributors LLC will receive a portion of the daily investor fee in consideration for its role in marketing and placing the ETNs under the VelocityShares brand.

Terms

The stated principal amount is $25 per ETN.

If the ETNs have not been previously redeemed or accelerated, the payout at maturity will be a cash payment equal to the fixing indicative value on Dec. 8, 2032.

The fixing indicative value for each series of ETNs on the inception date is $25 per ETN. On subsequent days, it equals (i) the product of (a) the fixing indicative value on the immediately preceding trading day times (b) the daily ETN performance on such trading day minus (ii) the daily investor fee on such trading day. The fixing indicative value will never be less than zero.

The daily ETN performance on any trading day will equal (i) one plus (ii) the daily accrual on such trading day plus (iii) the daily index performance.

The daily accrual represents the rate of interest that could be earned on a notional capital reinvestment at the three-month U.S. Treasury rate.

The daily index performance on any trading day will equal (i) the quotient of (a) the fixing index level of the applicable index on such trading day divided by (b) the fixing index level of the applicable index on the immediately preceding trading day minus (ii) one.

The daily investor fee on any trading day will equal the product of (i) the fixing indicative value on the immediately preceding trading day times (ii)(a) the investor fee factor times (b) 1/365 times (c) the number of calendar days from and including the immediately preceding trading day to but excluding that trading day.

The investor fee factor is 1.5%.

If the ETN calculation agents determine that, at any time on any day, the intraday exchange rate for the currency pair underlying any series of ETNs differs by 18.75% or more from the spot rate used in the determination of the fixing index level used to calculate the then most recent fixing indicative value and such difference represents depreciation of the applicable long currency against the applicable reference currency, an automatic acceleration event will occur for that series of ETNs.

If an automatic acceleration event occurs for a series of ETNs, those ETNs will be automatically accelerated for an amount equal to the automatic acceleration amount, which will be determined in the same manner as the next fixing indicative value after the automatic acceleration event would be determined except that for that purpose the daily index performance will be calculated using the automatic acceleration index level in lieu of the next fixing index level. The automatic acceleration index level will be determined in the same manner as the next fixing index level after the automatic acceleration event would be determined for the index except that (x) the hypothetical profit or loss established by the relevant offsetting transaction will be determined based on the data inputs for the applicable currency pair reported by the data source as of the automatic acceleration time, (y) such level will reflect a bid-ask spread on the full amount of the offsetting transaction, which means that the hypothetical offsetting transaction will be entered into based on the relevant “bid” or “ask” spot rate, as applicable, rather than the “mid” spot rate, and (z) such level will not reflect a resetting of the applicable index’s leveraged exposure to the applicable currency pair after the occurrence of the automatic acceleration event.

The issuer said the automatic acceleration amount is likely to be at least 75% less than the fixing indicative value on the prior trading day and may be zero.

The ETNs will be putable subject to a minimum of 25,000 ETNs for a cash payment per ETN equal to the greater of (A) zero and (B)(1) the fixing indicative value for such series of ETNs on the early redemption valuation date minus (2) a 0.09% early redemption charge.

The ETNs will be callable at any time for an amount equal to the fixing indicative value on the optional acceleration valuation date.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.