Cleary Gottlieb represented the underwriter, Citigroup Global Markets Inc., in Citigroup Global Markets Holdings’ $160 million offering of Enhanced Income Strategy Principal-Protected Notes Linked to the 2005-4 Dynamic Portfolio Index due November 29, 2010. Cleary was also special tax counsel in the transaction.
The enhanced income strategy notes are principal-protected debt securities linked to the performance of the 2005-4 Dynamic Portfolio Index, which allocates notional investments between a notional portfolio pursuing a “buy-write” equity strategy and a notional bond portfolio. The notional “buy-write portfolio” (the Buy-Write Index portfolio) was initially established in May. The Buy-Write Index portfolio tracks the performance of a hypothetical investment strategy in which (a) a notional investment is made in the S&P 500 Index® and (b) notional call options on the S&P 500 Index® are written on a monthly basis. A buy-write strategy allows an investor to participate in equity appreciation that is capped by the strike prices of the notional call options while limiting downside exposure through premiums received when the options are written. The strategy appeals to investors who believe that equity markets will remain flat or show only moderate growth during the term of the notes.