OREANDA-NEWS. Fitch Ratings has assigned an 'A(emr)' rating to Citigroup Global Markets Funding Luxembourg's (CGMFL) $25 million principal protected market-linked senior note issuance.

The senior notes, due March 29, 2031, are unconditionally and irrevocably guaranteed by Citigroup Global Markets Limited (CGML), which has an Issuer Default Rating (IDR) of 'A/F1' by Fitch with a Positive Outlook. CGML is a wholly-owned subsidiary of Citigroup, Inc. (Citigroup). The guarantee covers the full repayment of principal at maturity and a variable amount of interest. The interest rate is variable, based on calculation involving the day count convention, the three-month LIBOR rate and the 30 year USD 30/360 semiannual swap rate. Depending on how these variables interact, the interest due could be as low as 0% for a given period.

KEY RATING DRIVERS

SENIOR DEBT
The rating is based solely on the guarantee from CGML, which is considered a material operating entity for Citigroup. The rating does not contemplate the collateral backing the note.

The IDR of CGML is aligned with Citigroup reflecting Fitch's view that CGML is integral to Citigroup's business strategy and operations. The Outlook for CGML's long-term IDR is Positive to reflect Fitch's belief that the U.S. single point of entry resolution regime, the likely implementation of total loss-absorbing capital (TLAC) requirements for U.S. globally-systemically important banks, and the presence of substantial holding company debt reduces the default risk of domestic operating subsidiaries' senior liabilities relative to holding company senior debt.

The 'emr' subscript highlights that the variability of the coupon created by the embedded market risk is excluded from the rating assigned to the note.

RATING SENSITIVITIES

SENIOR DEBT
The rating of the principal protected market-linked senior note is sensitive to changes in CGML's IDR, which is currently has a Positive Outlook. Specific factors that Fitch seeks additional clarity on before resolving the CGML's Outlook, which may impact CGMFL's debt rating, include host country clarification on internal TLAC, the quantum of internal TLAC and whether it will be pre-positioned. If the amount of TLAC is sufficient for recapitalization in Fitch's opinion and is pre-positioned, Fitch will likely upgrade CGML's ratings; further, if home and host country regulators reach agreements where pre-positioning is not required, the rating will not be upgraded and the Outlook will be revised to Stable. If CGML's Outlook is revised to Stable, this would not impact CGMFL's debt rating.