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Derivatives

Citi Plots Long/Short CPDO

Citigroup is working on a long/short constant proportion debt obligation.

Citigroup is working on a long/short constant proportion debt obligation. The deal, which is also Citi's first CPDO and does not yet have a name, is expected to go long the five-year CDX and iTraxx indices and short the 10-year. In that way, it will be similar to one offered by SG Corporate & Investment Banking (DW, 2/2)

Priya Nair, head of European credit structuring and syndicate at Citi in London, said the firm is considering also going short five-year and long 10-year to add positive carry and potentially adding a manager, which the SG deal does not do. These features, however, are still being negotiated with Moody's Investors Service which is rating the deal.

Nair said the CPDO offering will have variable leverage, ranging from 10 to 15 times, and notes will be rated AA with coupons in the range of 100 to 120 basis points. It will be marketed globally.

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