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, 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 DECEMBER 1, 2016
|
Citigroup Global Markets Holdings Inc.
|
December
-----
,
2016
Medium-Term Senior
Notes, Series N
Pricing Supplement
No. 2016–USNCH0252
Filed Pursuant
to Rule 424(b)(2)
Registration Statement Nos. 333-214120 and 333-214120-03
|
Callable
Fixed to Floating Rate Leveraged CMS Spread Notes Due December
-----
,
2036
|
§
|
The notes offered by this pricing supplement are unsecured senior debt
securities issued by Citigroup Global Markets Holdings Inc. and guaranteed by Citigroup Inc. The notes will bear interest at a
fixed rate for one year and, thereafter, will bear interest at a floating rate based on the modified CMS spread, subject to the
maximum interest rate specified below. The CMS spread is the 30-year constant maturity swap rate (“CMS30”)
minus
the 2-year constant maturity swap rate (“CMS2”) and will be reset quarterly. The modified CMS spread is the CMS spread
minus
0.25%. The notes offer an above-market fixed interest rate in the first year. Thereafter, however, interest payments
on the notes will vary based on fluctuations in the modified CMS spread and may be as low as 0%.
|
|
§
|
We may call the notes for mandatory redemption on any interest payment
date beginning one year after issuance.
|
|
§
|
Investors in the notes 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 notes if we and Citigroup Inc.
default on our obligations.
All payments on the notes 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 notes are fully and unconditionally guaranteed by Citigroup Inc.
|
Aggregate stated principal amount:
|
$
|
Stated principal amount:
|
$1,000 per note
|
Pricing date:
|
December , 2016 (expected to be December 9, 2016)
|
Issue date:
|
December , 2016 (three business days after the pricing date)
|
Maturity date:
|
Unless earlier called by us, December , 2036 (expected to be December 14, 2036)
|
Payment at maturity:
|
At maturity, unless we have earlier called the notes, you will receive for each note you then hold an amount in cash equal to $1,000
plus
any accrued and unpaid interest
|
Interest:
|
§
During each interest period from and including the issue date to but excluding December , 2017 (expected to be December
14, 2017), the notes will bear interest at a fixed rate of 9.00% per annum
§
During each interest period commencing on or after December , 2017 (expected to be December
14, 2017), the notes will bear interest at a floating rate equal to 5 times the modified CMS spread, as determined on the interest
determination date for that interest period, subject to a maximum interest rate of 10.00% per annum and a minimum interest rate
of 0.00% per annum
After the first year of the term of the notes, interest payments
will vary based on fluctuations in the modified CMS spread. After the first year, the notes may pay a below-market rate or no interest
at all for an extended period of time, or even throughout the entire remaining term.
|
CMS spread:
|
On any interest determination date, CMS30
minus
CMS2, each as determined on that interest determination date
|
Modified CMS spread:
|
The CMS spread
minus
0.25%
|
Interest determination date:
|
For any interest period commencing on or after December , 2017 (expected to be December 14, 2017), the second U.S. government securities business day prior to the first day of that interest period
|
Interest period:
|
Each three-month period from and including an interest payment date (or the issue date, in the case of the first interest period) to but excluding the next interest payment date
|
Interest payment dates:
|
The day of each March, June, September and December (expected to be the 14th day of each March, June, September and December), beginning on March , 2017 (expected to be March 14, 2017) and ending on the maturity date or, if applicable, the date when the notes are redeemed
|
Call right:
|
We may call the notes, in whole and not in part, for mandatory redemption on any interest payment date beginning on December , 2017 (expected to be December 14, 2017), upon not less than five business days’ notice. Following an exercise of our call right, you will receive for each note you then hold an amount in cash equal to $1,000
plus
any accrued and unpaid interest.
|
Survivor's option:
|
The notes are Survivor’s Option Notes. The representative of a deceased beneficial owner of the notes will have the right to request early repayment of the notes, subject to the terms and limitations described in the accompanying product supplement in the section “Repayment Upon Death.”
|
Listing:
|
The notes will not be listed on any securities exchange
|
CUSIP / ISIN:
|
17290JAA9 / US17290JAA97
|
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
(2)
|
Per note:
|
$1,000.00
|
$50.00
|
$950.00
|
Total:
|
$
|
$
|
$
|
(1) Citigroup
Global Markets Holdings Inc. currently expects that the estimated value of the notes on the pricing date will be between $900.00
and $950.00 per note, which will be less than the issue price. The estimated value of the notes 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 notes from you at any time
after issuance. See “Valuation of the Notes” in this pricing supplement.
(2) CGMI
will receive an underwriting fee of up to $50.00 for each $1,000 note sold in this offering. The per note proceeds to issuer above
represents the minimum per note proceeds to issuer, assuming the maximum per note underwriting fee. For more information on the
distribution of the notes, 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 notes declines. See “Use of Proceeds and Hedging” in the accompanying prospectus.
Investing
in the notes involves risks not associated with an investment in conventional debt securities. See “Summary Risk Factors”
beginning on page PS-3.
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 product supplement, prospectus supplement and prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
Y
ou
should read this pricing supplement together with the accompanying product supplement,
prospectus
supplement and prospectus
,
which can be accessed
via the following hyperlinks:
Product
Supplement IE-07-03 dated October 14, 2016
Prospectus
Supplement and Prospectus each dated October 14, 2016
T
he
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.
Citigroup Global Markets Holdings Inc.
|
Callable Fixed to Floating Rate Leveraged CMS Spread Notes Due December
-----
, 2036
|
|
Additional Information
General
. The terms of the notes 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, for complete information about the manner in which interest payments on the notes will be calculated and paid, you
should read the section “Description of the Notes” in the accompanying product supplement together with the information
in this pricing supplement. It is important that you read the accompanying product supplement, prospectus supplement and prospectus
together with this pricing supplement in connection with your decision whether to invest in the notes. Certain terms used but not
defined in this pricing supplement are defined in the accompanying product supplement.
Business Day Convention.
Notwithstanding what is otherwise
provided in the accompanying product supplement, if an interest payment date falls on a day that is not a business day (as defined
in the accompanying product supplement), the interest payment to be made on that interest payment date will be made on the next
succeeding business day. Such payment will have the same force and effect as if made on that interest payment date, and no interest
will accrue as a result of delayed payment.
Hypothetical Examples
The table below presents examples of hypothetical quarterly interest
payments after the first year of the term of the notes based on various hypothetical CMS spread values.
As illustrated below, if CMS30 is less than or equal to CMS2
plus 0.25% on the applicable interest determination date, the floating interest rate will be the minimum interest rate of 0% and
no interest will accrue on the notes for the related interest period. If, on the other hand, the CMS spread is greater than 2.25%
(taking into account that the modified CMS spread will be multiplied by 5 on the applicable interest determination date), the floating
rate of interest for the related interest period will be limited to the maximum interest rate of 10.00% per annum and you will
not receive any interest in excess of that maximum per annum rate.
The examples are for purposes of illustration only and have been
rounded for ease of analysis. The actual interest payments after the first year of the term of the notes will depend on the actual
value of the CMS spread on each interest determination date. The applicable interest rate for each interest period will be determined
on a per annum basis but will apply only to that interest period.
Hypothetical CMS Spread
(1)
|
Hypothetical Interest Rate per Annum
(2)
|
Hypothetical Quarterly Interest Payment per Note
(3)
|
-1.000%
|
0.000%
|
$0.00
|
-0.800%
|
0.000%
|
$0.00
|
-0.600%
|
0.000%
|
$0.00
|
-0.400%
|
0.000%
|
$0.00
|
-0.200%
|
0.000%
|
$0.00
|
0.000%
|
0.000%
|
$0.00
|
0.200%
|
0.000%
|
$0.00
|
0.250%
|
0.000%
|
$0.00
|
0.400%
|
0.750%
|
$1.88
|
0.600%
|
1.750%
|
$4.38
|
0.800%
|
2.750%
|
$6.88
|
1.000%
|
3.750%
|
$9.38
|
1.200%
|
4.750%
|
$11.88
|
1.400%
|
5.750%
|
$14.38
|
1.600%
|
6.750%
|
$16.88
|
1.800%
|
7.750%
|
$19.38
|
2.000%
|
8.750%
|
$21.88
|
2.200%
|
9.750%
|
$24.38
|
2.250%
|
10.000%
|
$25.00
|
2.400%
|
10.000%
|
$25.00
|
2.600%
|
10.000%
|
$25.00
|
2.800%
|
10.000%
|
$25.00
|
3.000%
|
10.000%
|
$25.00
|
3.200%
|
10.000%
|
$25.00
|
_______________________________
(1) Hypothetical CMS spread = (CMS30 – CMS2),
where
CMS30 and CMS2 are each determined on the second U.S. government securities business day prior to the beginning of the applicable
interest period.
(2) Hypothetical interest rate per annum for the interest period
= 5 × the modified CMS spread, subject to the maximum interest rate and the minimum interest rate.
Citigroup Global Markets Holdings Inc.
|
Callable Fixed to Floating Rate Leveraged CMS Spread Notes Due December
-----
, 2036
|
|
(3) Hypothetical quarterly interest payment per note = (i) the
stated principal amount of $1,000
multiplied by
the applicable interest rate per annum
divided by
(ii) 4.
Summary Risk Factors
An investment in the notes is significantly riskier than an investment
in conventional debt securities. The notes 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
notes, and are also subject to risks associated with fluctuations in the CMS spread. Accordingly, the notes are suitable only for
investors who are capable of understanding the complexities and risks of the notes. You should consult your own financial, tax
and legal advisers as to the risks of an investment in the notes and the suitability of the notes in light of your particular circumstances.
The following is a summary of certain key risk factors for investors
in the notes. You should read this summary together with the more detailed description of risks relating to an investment in the
notes contained in the section “Risk Factors Relating to the Notes” beginning on page IE-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.
|
§
|
After the first year, the notes will pay interest
at a floating rate that may be as low as 0% on one or more interest payment dates.
The floating interest payments on the notes
will vary based on fluctuations in the modified CMS spread. If the modified CMS spread narrows, interest payments on the notes
will be reduced, and if the modified CMS spread is 0% for any interest period, the notes will pay no interest at all for that interest
period. The CMS spread is influenced by many complex economic factors and is impossible to predict. After the first year, it is
possible that the notes will pay a below-market rate or no interest at all for an extended period of time, or even throughout the
entire remaining term of the notes. Although the notes provide for the repayment of the stated principal amount at maturity, you
may nevertheless suffer a loss on your investment in the notes, in real value terms, if you receive below-market or no interest
payments after the first year of the term of the notes.
|
|
§
|
The notes may pay below-market or no interest if
short-term interest rates rise.
Although there is no single factor that determines CMS spreads, CMS spreads have 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 notes 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 CMS spread. In that event, the floating rate payable on the notes may decline significantly, possibly to 0%. 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 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.
See “About Constant Maturity Swap Rates” in the accompanying product supplement.
|
|
§
|
The floating interest rate on the notes may be
lower than other market interest rates.
The floating interest rate on the notes will not necessarily move in line with general
U.S. market interest rates or even CMS rates and, in fact, may move inversely with general U.S. market interest rates, as described
in the preceding risk factor. For example, if there is a general increase in CMS rates but shorter-term rates rise more than longer-term
rates, the CMS spread will decrease, as will the floating rate payable on the notes. Accordingly, the notes are not appropriate
for investors who seek floating interest payments based on general market interest rates.
|
|
§
|
The interest rate on the notes is subject to a
cap.
As a result, the notes may pay interest at a lower rate than an alternative instrument that is not so capped.
|
|
§
|
The CMS spread applicable to any interest period
will be reduced by 0.25%.
When determining the floating interest rate payable after the first year, 0.25% will be deducted
from the level of the CMS spread on the relevant interest determination date to determine the modified CMS spread. Because the
modified CMS spread is multiplied by 5 in order to determine the floating interest rate (subject to the maximum interest rate),
the 0.25% deduction from the CMS spread reduces the floating interest rate by a full 1.25%. As a result, the interest payable on
your notes will be less than that which would be payable without the 0.25% deduction.
|
|
§
|
The notes may be called for mandatory redemption
at our option beginning one year after issuance, which will limit your potential to benefit from favorable CMS spread performance.
If we call the notes, we will do so at a time that is advantageous to us and without regard to your interests. We are more
likely to call the notes at a time when the CMS spread is performing favorably from your perspective and we expect it to continue
to do so. Accordingly, our call right may limit your potential to receive above-market interest payments. Conversely, when the
CMS spread is performing unfavorably from your perspective or when we expect it to do so in the future, we are less likely to call
the notes, so that you may continue to hold notes paying below-market or no interest for an extended period of time. If we call
the notes, you may have to reinvest the proceeds in a lower interest rate environment.
|
|
§
|
The notes are subject to the credit risk of Citigroup
Global Markets Holdings Inc. and Citigroup Inc.
If we default on our obligations under the notes and Citigroup Inc. defaults
on its guarantee obligations, you may not receive anything owed to you under the notes.
|
Citigroup Global Markets Holdings Inc.
|
Callable Fixed to Floating Rate Leveraged CMS Spread Notes Due December
-----
, 2036
|
|
|
§
|
Secondary market sales of the notes may result
in a loss of principal.
You will be entitled to receive at least 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 or until the
date when the notes are redeemed. The value of the notes may fluctuate, and if you sell your notes in the secondary market prior
to maturity or the date when the notes are redeemed, you may receive less than your initial investment.
|
|
§
|
The notes are riskier than notes with a shorter
term.
The notes are relatively long-dated, subject to our call right. Because the notes are relatively long-dated, many of
the risks of the notes are heightened as compared to notes with a shorter term, because you will be subject to those risks for
a longer period of time. In addition, the value of a longer-dated note is typically less than the value of an otherwise comparable
note with a shorter term.
|
|
§
|
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 difference between CMS30 and CMS2 may not be
as great as the difference between CMS30 and a CMS rate with a shorter maturity.
The floating interest payments on the notes
may be less than they would be if the notes were linked to the spread between CMS30 and a CMS rate with a shorter maturity than
2 years.
|
|
§
|
The estimated value of the notes 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 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 CMS spread and interest rates. CGMI’s views on these inputs and assumptions
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 interest that 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. Our internal funding rate is not an interest rate that we will pay to investors in the notes.
|
§
|
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
|
Citigroup Global Markets Holdings Inc.
|
Callable Fixed to Floating Rate Leveraged CMS Spread Notes Due December
-----
, 2036
|
|
|
|
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 CMS spread and a number of other factors, including expectations of future levels of CMS30 and CMS2, the level of general
market interest rates, the time remaining to maturity, CGMI’s estimation of the value of the survivor’s option and
our and Citigroup Inc.’s creditworthiness, as reflected in our secondary market rate. You should understand that the value
of your notes at any time prior to maturity may be significantly less than the issue price.
|
|
§
|
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 CMS spread.
You should not take our offering of the notes as an expression
of our views about how the CMS spread will perform in the future or as a recommendation to invest in any instrument linked to the
CMS spread, 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 manner in which CMS rates are calculated may
change in the future.
The method by which CMS30 and CMS2 are calculated may change in the future, as a result of governmental
actions, actions by the publisher of CMS30 and CMS2 or otherwise. We cannot predict whether the method by which CMS30 or CMS2 is
calculated will change or what the impact of any such change might be. Any such change could affect the level of the CMS spread
in a way that has a significant adverse effect on the notes.
|
|
§
|
Hedging and other trading activities by our affiliates
may affect the determinations of CMS30 and CMS2.
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 levels of CMS30 and CMS2 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.
|
|
§
|
The calculation agent, which is our affiliate,
will make important determinations with respect to the notes.
If certain events occur, Citibank, N.A., as calculation agent,
will be required to make certain discretionary judgments that could significantly affect one or more payments owed to you under
the notes. Such judgments could include, among other things, determining the level of CMS30 or CMS2 if it is not otherwise available
on an interest determination date and selecting a successor rate if either CMS30 or CMS2 is discontinued. Any of these determinations
made by Citibank, N.A. in its capacity as calculation agent may adversely affect any floating interest payment owed to you under
the notes.
|
|
§
|
The survivor’s option is subject to significant
limitations.
The representative of a deceased beneficial owner of the notes will have the right to request early repayment
of the notes by us on the terms described in the section “Repayment Upon Death” in the accompanying product supplement.
That repayment right is subject to significant limitations, including the following: the notes must have been beneficially owned
by the deceased beneficial owner or his or her estate for at least one year prior to submission of the request for repayment; the
notes will be grouped with all other Survivor’s Option Notes and subject to an aggregate annual repayment limit, as more
fully described under “Repayment Upon Death” in the accompanying product supplement; and we will not be obligated to
repay more than $250,000 in stated principal amount of the notes offered by this pricing supplement to the representative of any
individual deceased beneficial owner of the notes in any calendar year. Because of these limitations, your representative may not
be able to obtain repayment of any of the notes beneficially owned by you following your death, or may only be able to obtain repayment
of a portion of the notes owned by you, and any such repayment may be delayed for multiple years. See “Repayment Upon Death”
in the accompanying product supplement for additional information.
|
Information About the CMS Spread
The notes are CMS spread notes, which means that they pay interest
(after the first year) based on the difference, or spread, between two constant maturity swap (“
CMS
”) rates
of different maturities—CMS30 and CMS2. A CMS rate of a given maturity is, at any time, a market rate for the fixed leg of
a conventional fixed-for-floating U.S. dollar interest rate swap entered into at that time with that maturity, as more fully described
in the section “About Constant Maturity Swap Rates” in the accompanying product supplement. The relationship between
CMS rates of different maturities may be depicted by a curve on a graph that plots maturities on the x-axis and the applicable
CMS rate on the y-axis. See “About Constant Maturity Swap Rates” in the accompanying product supplement for examples
of CMS rate curves. Interest payments on the notes will depend on changes in the steepness of this CMS rate curve. If the CMS rate
curve steepens, such that the difference between CMS30 and CMS2 becomes greater, the floating interest payments on the notes will
generally increase, subject to the maximum interest rate on the notes. Conversely, if the CMS rate curve flattens or becomes inverted,
such that the difference between CMS30 and CMS2 becomes smaller or negative, the floating interest payments on the notes will generally
decrease, possibly to zero.
Citigroup Global Markets Holdings Inc.
|
Callable Fixed to Floating Rate Leveraged CMS Spread Notes Due December
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, 2036
|
|
Many complex economic factors may influence CMS rates and the
spread between CMS rates of different maturities. Accordingly, it is not possible to predict the future performance of any CMS
rate or the spread between CMS rates of different maturities. You should not purchase the notes unless you understand and are willing
to accept the significant risks associated with exposure to future changes in the CMS spread.
For information about how CMS30 and CMS2 will be determined on
each interest determination date, see “Description of the Notes—Terms Related to a Specified CMS Rate—Determining
a Specified CMS Rate” in the accompanying product supplement. CMS30 and CMS2 are calculated by ICE Benchmark Administration
Limited based on tradable quotes for U.S. dollar fixed-for-floating interest rate swaps of the relevant maturity that are sourced
from electronic trading venues.
Historical Information
The graph below shows the daily values of the CMS spread for
each day such value was available from January 2, 2006 through November 29, 2016 using historical data obtained from Bloomberg,
without giving effect to the 0.25% deduction reflected in the calculation of the modified CMS spread. The rate at which interest
will be payable on the notes will be based not on the CMS spread, which is depicted below, but on the modified CMS spread, which
is the CMS spread
minus
0.25%. The historical values of the CMS spread should not be taken as an indication of the future
values of the CMS spread during the term of the notes.
The CMS spread at 11:00 a.m. (New York time) on November 29,
2016 was 1.116%.
Historical CMS Spread (%)
January 2, 2006 to November 29, 2016
|
|
United States Federal Tax Considerations
Based on current market conditions, we expect the notes to be
treated as “contingent payment debt instruments” for U.S. federal income tax purposes, as described in the section
of the accompanying prospectus supplement called “United States Federal Tax Considerations—Tax Consequences to U.S.
Holders—Notes Treated as Contingent Payment Debt Instruments.” However, the treatment of the notes for U.S. federal
income tax purposes will be based on market conditions as of the pricing date, and the final Pricing Supplement for the notes will
provide further information regarding the treatment. If the notes are not treated as “contingent payment debt instruments,”
they will instead be treated as “variable rate debt instruments” with the consequences described in the section of
accompanying prospectus supplement called “United States Federal Tax Considerations—Tax Consequences to U.S. Holders—Notes
Treated as Variable Rate Debt Instruments.” The remainder of this summary assumes that the notes are treated as contingent
payment debt instruments.
If you are a U.S. Holder, you will be required to recognize interest
income at the “comparable yield,” which generally is the yield at which we could issue a fixed-rate debt instrument
with terms similar to those of the notes, including the level of subordination, term,
Citigroup Global Markets Holdings Inc.
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Callable Fixed to Floating Rate Leveraged CMS Spread Notes Due December
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, 2036
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|
timing of payments and general market conditions, but excluding
any adjustments for the riskiness of the contingencies or the liquidity of the notes. We are required to construct a “projected
payment schedule” in respect of the notes representing a payment or a series of payments the amount and timing of which would
produce a yield to maturity on the notes equal to the comparable yield. The amount of interest you include in income in each taxable
year based on the comparable yield will be adjusted upward or downward to reflect the difference, if any, between the actual and
projected payments on the notes as determined under the projected payment schedule.
Although it is not entirely clear how the comparable yield and
projected payment schedule must be determined when a debt instrument may be redeemed by the issuer prior to maturity, we have determined
that the comparable yield for a note is a rate of %, compounded quarterly, and that the projected
payment schedule with respect to a note consists of the following payments:
March 14, 2017
|
$
|
March 14, 2022
|
$
|
March 14, 2027
|
$
|
March 14, 2032
|
$
|
June 14, 2017
|
$
|
June 14, 2022
|
$
|
June 14, 2027
|
$
|
June 14, 2032
|
$
|
September 14, 2017
|
$
|
September 14, 2022
|
$
|
September 14, 2027
|
$
|
September 14, 2032
|
$
|
December 14, 2017
|
$
|
December 14, 2022
|
$
|
December 14, 2027
|
$
|
December 14, 2032
|
$
|
March 14, 2018
|
$
|
March 14, 2023
|
$
|
March 14, 2028
|
$
|
March 14, 2033
|
$
|
June 14, 2018
|
$
|
June 14, 2023
|
$
|
June 14, 2028
|
$
|
June 14, 2033
|
$
|
September 14, 2018
|
$
|
September 14, 2023
|
$
|
September 14, 2028
|
$
|
September 14, 2033
|
$
|
December 14, 2018
|
$
|
December 14, 2023
|
$
|
December 14, 2028
|
$
|
December 14, 2033
|
$
|
March 14, 2019
|
$
|
March 14, 2024
|
$
|
March 14, 2029
|
$
|
March 14, 2034
|
$
|
June 14, 2019
|
$
|
June 14, 2024
|
$
|
June 14, 2029
|
$
|
June 14, 2034
|
$
|
September 14, 2019
|
$
|
September 14, 2024
|
$
|
September 14, 2029
|
$
|
September 14, 2034
|
$
|
December 14, 2019
|
$
|
December 14, 2024
|
$
|
December 14, 2029
|
$
|
December 14, 2034
|
$
|
March 14, 2020
|
$
|
March 14, 2025
|
$
|
March 14, 2030
|
$
|
March 14, 2035
|
$
|
June 14, 2020
|
$
|
June 14, 2025
|
$
|
June 14, 2030
|
$
|
June 14, 2035
|
$
|
September 14, 2020
|
$
|
September 14, 2025
|
$
|
September 14, 2030
|
$
|
September 14, 2035
|
$
|
December 14, 2020
|
$
|
December 14, 2025
|
$
|
December 14, 2030
|
$
|
December 14, 2035
|
$
|
March 14, 2021
|
$
|
March 14, 2026
|
$
|
March 14, 2031
|
$
|
March 14, 2036
|
$
|
June 14, 2021
|
$
|
June 14, 2026
|
$
|
June 14, 2031
|
$
|
June 14, 2036
|
$
|
September 14, 2021
|
$
|
September 14, 2026
|
$
|
September 14, 2031
|
$
|
September 14, 2036
|
$
|
December 14, 2021
|
$
|
December 14, 2026
|
$
|
December 14, 2031
|
$
|
December 14, 2036
|
$
|
Neither the comparable yield nor the projected payment schedule
constitutes a representation by us regarding the actual amounts that we will pay on the notes.
Upon the sale or exchange of the notes (including retirement
upon early redemption or at maturity), you generally will recognize gain or loss equal to the difference between the proceeds received
and your adjusted tax basis in the notes. Your adjusted tax basis will equal your purchase price for the notes increased by interest
income previously included on the notes (without regard to the adjustments described above) and decreased by prior payments according
to the projected payment schedule. Any gain generally will be treated as ordinary income, and any loss generally will be treated
as ordinary loss to the extent of prior net interest inclusions on the note and as capital loss thereafter.
Subject to the discussions under “United States Federal
Tax Considerations—Tax Consequences to Non-U.S. Holders” and “—FATCA” in the accompanying prospectus
supplement, if you are a Non-U.S. Holder of notes, you generally will not be subject to U.S. federal withholding or income tax
in respect of payments on or amounts received on the sale, exchange or retirement of the notes, provided that (i) income in respect
of the notes is not effectively connected with your conduct of a trade or business in the United States, and (ii) you comply with
the applicable certification requirements. See “United States Federal Tax Considerations—Tax Consequences to Non-U.S.
Holders” in the accompanying prospectus supplement for a more detailed discussion of the rules applicable to Non-U.S. Holders
of the notes.
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.
Citigroup Global Markets Holdings Inc.
|
Callable Fixed to Floating Rate Leveraged CMS Spread Notes Due December
-----
, 2036
|
|
Supplemental Plan of Distribution
CGMI, an affiliate of Citigroup
Global Markets Holdings Inc. and the underwriter of the sale of the notes, is acting as principal and will receive an underwriting
fee of up to $50.00 for each $1,000 note sold in this offering. The actual underwriting fee will be equal to the selling concession
paid to selected dealers. CGMI will pay selected dealers not affiliated with CGMI a variable selling concession of up to $50.00
for each $1,000 note they sell.
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.
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.
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. CGMI or such other of our affiliates may profit from this expected hedging activity even if the value of the notes
declines. For additional information on the ways in which our counterparties may hedge our obligations under the notes, see “Use
of Proceeds and Hedging” in the accompanying prospectus.
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 uncertainty on the date of this preliminary pricing supplement about
the inputs to CGMI’s proprietary pricing models on the pricing 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.”
Certain Selling Restrictions
Hong Kong Special Administrative Region
The contents of this pricing supplement and the accompanying
product supplement, prospectus supplement and prospectus have not been reviewed by any regulatory authority in the Hong Kong Special
Administrative Region of the People’s Republic of China (“Hong Kong”). Investors are advised to exercise caution
in relation to the offer. If investors are in any doubt about any of the contents of this pricing supplement and the accompanying
product supplement, prospectus supplement and prospectus, they should obtain independent professional advice.
The notes have not been offered or sold and will not be offered
or sold in Hong Kong by means of any document, other than
|
(i)
|
to persons whose ordinary business is to buy or sell shares or debentures (whether as principal or agent); or
|
|
(ii)
|
to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “Securities
and Futures Ordinance”) and any rules made under that Ordinance; or
|
|
(iii)
|
in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance
(Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance; and
|
Citigroup Global Markets Holdings Inc.
|
Callable Fixed to Floating Rate Leveraged CMS Spread Notes Due December
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, 2036
|
|
There is no advertisement, invitation or document relating to
the notes which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except
if permitted to do so under the securities laws of Hong Kong) other than with respect to securities which are or are intended to
be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and
Futures Ordinance and any rules made under that Ordinance.
Non-insured Product: These notes are not insured by any governmental
agency. These notes are not bank deposits and are not covered by the Hong Kong Deposit Protection Scheme.
Singapore
This pricing supplement and the accompanying product supplement,
prospectus supplement and prospectus have not been registered as a prospectus with the Monetary Authority of Singapore, and the
notes will be offered pursuant to exemptions under the Securities and Futures Act, Chapter 289 of Singapore (the “Securities
and Futures Act”). Accordingly, the notes may not be offered or sold or made the subject of an invitation for subscription
or purchase nor may this pricing supplement or any other document or material in connection with the offer or sale or invitation
for subscription or purchase of any notes be circulated or distributed, whether directly or indirectly, to any person in Singapore
other than (a) to an institutional investor pursuant to Section 274 of the Securities and Futures Act, (b) to a relevant person
under Section 275(1) of the Securities and Futures Act or to any person pursuant to Section 275(1A) of the Securities and Futures
Act and in accordance with the conditions specified in Section 275 of the Securities and Futures Act, or (c) otherwise pursuant
to, and in accordance with the conditions of, any other applicable provision of the Securities and Futures Act. Where the notes
are subscribed or purchased under Section 275 of the Securities and Futures Act by a relevant person which is:
|
(a)
|
a corporation (which is not an accredited investor (as defined in Section 4A of the Securities and Futures Act)) the sole business
of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited
investor; or
|
|
(b)
|
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is
an individual who is an accredited investor, securities (as defined in Section 239(1) of the Securities and Futures Act) of that
corporation or the beneficiaries’ rights and interests (howsoever described) in that trust shall not be transferable for
6 months after that corporation or that trust has acquired the relevant securities pursuant to an offer under Section 275 of the
Securities and Futures Act except:
|
|
(i)
|
to an institutional investor or to a relevant person defined in Section 275(2) of the Securities and Futures Act or to any
person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the Securities and Futures Act; or
|
|
(ii)
|
where no consideration is or will be given for the transfer; or
|
|
(iii)
|
where the transfer is by operation of law; or
|
|
(iv)
|
pursuant to Section 276(7) of the Securities and Futures Act; or
|
|
(v)
|
as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005
of Singapore.
|
Any notes referred to herein may not be registered with any regulator,
regulatory body or similar organization or institution in any jurisdiction.
The notes are Specified Investment Products (as defined in the
Notice on Recommendations on Investment Products and Notice on the Sale of Investment Product issued by the Monetary Authority
of Singapore on 28 July 2011) that is neither listed nor quoted on a securities market or a futures market.
Non-insured Product: These notes are not insured by any governmental
agency. These notes are not bank deposits. These notes are not insured products subject to the provisions of the Deposit Insurance
and Policy Owners’ Protection Schemes Act 2011 of Singapore and are not eligible for deposit insurance coverage under the
Deposit Insurance Scheme.
Contact
Clients may contact their local brokerage representative. Third-party
distributors may contact Citi Structured Investment Sales at (212) 723-7005.
©
2016 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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