Fitch Rates Citigroup Global Markets Funding Luxembourg's IDRs 'A' and 'F1'; Outlook Positive

CHICAGO--()--Fitch Ratings has assigned Long- and Short-Term Issuer Default Ratings (IDRs) of 'A'/'F1' to Citigroup Global Markets Funding Luxembourg (CGMFL) reflecting Citigroup Inc.'s ability and propensity to support CGMFL.

KEY RATING DRIVERS

IDRs

CGMFL is a wholly-owned subsidiary of Citigroup Global Markets Limited (CGML), rated 'A'/'F1' by Fitch. CGML is Citigroup's primary international broker-dealer in the UK, headquartered in London. CGML operates globally, generating the majority of its business in the EMEA region, with the remainder coming from Asia and the Americas. CGML is designated a Material Legal Entity in the Citigroup's Resolution Plan.

CGMFL is primarily a funding vehicle for CGML, issuing only structured notes and warrants to non-U.S. investors. CGFML's notes and warrants, which may be principal or non-principal-protected, are guaranteed by CGML. These securities cannot be sold to U.S. persons in the U.S.

Given the parent's ability and propensity to support CGMFL, Fitch has equalized the ratings with the parent. Fitch views any required support that may be needed would be immaterial relative to the ability of the parent to provide it. CGMFL is the only structured note issuer of CGML, and accounts for only approximately 1.5% of total funding for Citigroup. Further, Fitch believes that a potential default by this entity would constitute huge reputational risk to the parent. Lastly, Fitch believes there is a high level of management and operational integration that provides support for equalizing the rating with CGML.

CGMFL's Positive Rating Outlook is in line with its parent's Rating Outlook. The Outlook on CGML, a Material Legal Entity under Citigroup's Resolution Plan, reflects the likelihood of internal total loss-absorbing capacity (TLAC) as required by the Financial Stability Board (FSB). The Positive Outlook reflects the agency's belief that the internal TLAC of material international operating companies will likely be large enough to meet and exceed Pillar 1 capital requirements and will then be sufficient to recapitalize them. A one notch upgrade is likely once Fitch has sufficient clarity on additional disclosure on the pre-positioning of internal TLAC and its sufficiency in size to cover a default of senior operating company liabilities. Sufficient clarity may, however, take longer to come through than the typical outlook horizon of one to two years.

SENIOR DEBT

The market-linked debt rating is driven by the guarantee from CGML, and therefore equalized with CGML's IDR.

Fitch only rates principal-protected notes, which solely addresses the credit risk of the issuer or guarantor, in this case, CGML. Fitch appends a subscript (emr) to its market-linked note ratings to highlight the variability of the coupon created by the embedded market risk and is excluded from the rating assigned to the note.

Fitch would not assign ratings to non-principal protected notes that are issued out of CGMFL. Non-principal protected notes are subject to the lack of repayment of principal at maturity.

RATING SENSITIVITIES

IDRs

CGMFL's ratings would be sensitive to changes in Fitch's view of the relative importance of this entity to CGML or Citigroup, Inc. The ratings may also be impacted by changes in the IDRs of CGML. Further, if CGMFL were to issue any non-guaranteed securities, Fitch may consider notching the rating down from CGML.

If CGML's Rating Outlook is revised to Stable, there would be no impact to CGMFL's IDRs; however, its Rating Outlook would also be similarly revised to Stable.

SENIOR DEBT

The market-linked senior debt rating would be sensitive to any changes in CGML's ratings and/or any changes in the Deed of Guarantee provided by the parent. Further, if debt is issued by CGMFL, and is not covered by the Deed of Guarantee from the parent, its ratings would be notched down from its parent.

Fitch has assigned the following rating:

Citigroup Global Markets Funding Luxembourg

--Long-Term IDR 'A'; Outlook Positive;

--Short-Term IDR 'F1'.

Fitch has affirmed the following rating:

Citigroup Global Markets Funding Luxembourg

--Senior unsecured at 'A' (emr).

Additional information is available on www.fitchratings.com.

Applicable Criteria

Global Bank Rating Criteria (pub. 15 Jul 2016)

https://www.fitchratings.com/site/re/884135

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1013131

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1013131

Endorsement Policy

https://www.fitchratings.com/regulatory

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Fitch Ratings, Inc.
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Julie Solar
Senior Director
+1-312-368-3153
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Meghan Neenan
Senior Director
+1-212-908-0121
or
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Christopher Wolfe
Managing Director
+1-212-908-0771
or
Media Relations
Hannah James, + 1-646-582-4947
hannah.james@fitchratings.com

Contacts

Fitch Ratings, Inc.
Primary Analyst
Julie Solar
Senior Director
+1-312-368-3153
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Meghan Neenan
Senior Director
+1-212-908-0121
or
Committee Chairperson
Christopher Wolfe
Managing Director
+1-212-908-0771
or
Media Relations
Hannah James, + 1-646-582-4947
hannah.james@fitchratings.com