Cleary Gottlieb represented Citigroup Global Markets Inc., as underwriter, in Citigroup Funding’s $57.5 million offering of 5.75 million Premium Mandatory Callable Equity-Linked Securities (PACERS) due December 22, 2008. Cleary also acted as special tax counsel to the issuer in the transaction.
PACERS are debt securities linked to the performance of the PHLX Oil Service Sector Index. If the value of the Index during the call determination period each year is greater than or equal to the initial index value, the PACERS will be called and pay a mandatory call premium.
If not called, investors are repaid their full principal amount at maturity so long as the value of the Index had been greater than 75% of the initial index value during the term of the PACERS. If the value of the Index on any trading day during this period had declined by 25% or more, the maturity payment is directly linked to the percentage change of the Index and will be less than the initial investment. The PACERS do not pay interest. The payments due under the PACERS are fully and unconditionally guaranteed by Citigroup Inc.