Citigroup is pitching an income- and growth-paying structured note tied to an index of U.S. homebuilders.Nick Parcharidis, managing director in equity structured product sales in New York, said the note ties in with the firm's research. "We are bullish on the homebuilding sector," he explained.
The note is due to price Jan. 25 and Parcharidis said it is too early to discuss a target size for the issue. He conceded that negative news from homebuilder Lennar Corp. may dissuade some investors but Citi is still confident the structure is a timely one.
The note has a maximum one-year maturity and after the first six months can be called at Citi's discretion. It pays quarterly coupons of 1 3/4% and a potential yield to call of 16-19% per annum if called. The note is not capital protected. If it is not called and the reference Standard & Poor's Homebuilders Select Industry Index has not gained on its value at the launch of the note, the investor stands to lose capital.
The combination of income and growth also makes the structure attractive, said Parcharidis. "In this environment investors still have a bias toward income and they are willing to give up some growth to get that," he explained.
