SEC Company Response from CITIGROUP INC (C, C-PN) (CIK 0000831001) (C) — Mar 11, 2009
CITIGROUP INC (C, C-PN) (CIK 0000831001)
Date: March 11, 2009 · CIK: 0000831001 · Accession: 0001104659-09-016334
AI Filing Summary & Sentiment
File numbers found in text: 001-09924
Referenced dates: January 14, 2009, October 27, 2008, October 27, 2008
Letter
Securities and Exchange Commission Citigroup Inc. Form 10-K for Fiscal Year Ended December 31, Forms 10-Q for 2008 File No. 001-09924
Dear Mr. Vaughn:
Enhancement of the overall disclosures in filings by Citigroup Inc. (“Citigroup,” the “Company,” or “we”) is an objective that we share with the Staff and one that we consider in all our filings. This letter sets forth the responses of Citigroup to the comments of the staff of the U.S. Securities and Exchange Commission (SEC) contained in your letter dated January 14, 2009.
2007 Form 10-K
Municipal Securities Tender Option Bond (TOB) Trusts, page 92
1. We note your response to comment 1 to our letter dated October 27, 2008. Please clarify your response for us by specifically quantifying the total amount of TOB trusts for which you obtained insurance subsequent to establishing the trusts. Additionally, please tell us whether you have other QSPE’s (unrelated to Tender Option Bond Trusts) where you have used similar logic described in your response to comment 1D and concluded that QSPE status was not impacted by the changes
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made. If so, please describe the circumstances surrounding the changes and amendments, and quantify the amount of QSPE’s impacted.
Citigroup’s Response: The fair value of the bonds owned by QSPE TOB trusts that obtained insurance subsequent to their establishment was approximately [***] at December 31, 2008. We do not have other QSPEs to which similar logic was applied to conclude that qualifying status was unaffected by changes made to the governing documents.
Financial Statements
Note 4. Business Segments, page 128
2. Please refer to your response to prior comment 2 to our letter dated October 27, 2008 and provide us with the following information regarding reporting units for each period beginning in Q4 2007 through 2008 where a goodwill impairment test was performed:
· The fair value of each of your reporting units; and
· The carrying value of each of your reporting units.
Citigroup’s Response: During the period beginning in Q4 2007 through Q4 2008, a goodwill impairment test was performed for the reporting units and dates listed below (in billions USD):
[***]
[***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment.
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[***]
3. Please refer to your response to comment 2 to our letter dated October 27, 2008 and address the following regarding your valuation methodologies.
Market Approach
· Please provide us the selected market multiple and/or the implied DCF multiple for each reporting unit.
Citigroup’s Response: In reference to our response to comment 2 to the letter dated October 27, 2008, the market approach multiples used as part of the reporting unit valuations, or implied from the reporting unit valuations, performed as of February 29, 2008 are as follows:
[***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment.
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Market Approach Multiples – February 29, 2008 Test
US Consumer
The February 29, 2008 valuation for the US Consumer reporting unit was based on the sum of business level valuations (Cards, Retail Banking, Commercial Business and Consumer Lending), which were derived using the market approach. The selected market multiple for each business component of US Consumer was the average multiple based on a range of multiples determined from actual 2007 earnings and estimated 2008 earnings of comparable companies. In response to the question regarding the selected market multiple and/or the implied DCF multiple for each reporting unit, the “implied multiple” below was derived taking the sum of the business level valuations divided by the actual 2007 earnings and the estimated 2008 earnings. However, since the value was derived as a sum of business level valuations, the “implied multiple” requested was not used to arrive to the valuation of US Consumer.
[***]
The business level selected market multiples are as follows for US Consumer:
[***]
International Consumer
The February 29, 2008 valuation for the International Consumer reporting unit was based on the sum of business level valuations (Cards, Retail Banking, Commercial Business and Consumer Lending) performed on a country or regional level, which were derived using the market approach. The selected market multiple for each country or regional business component of International Consumer was the average multiple based on a range of multiples determined from actual 2007 earnings and estimated 2008 earnings of comparable companies. In response to the question regarding the selected market multiple and/or the implied DCF multiple for each reporting unit, the “implied multiple” below was derived taking the sum of the business level valuations divided by the actual 2007
[***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment.
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earnings and the estimated 2008 earnings. However, since the value was derived as a sum of business level valuations, the “implied multiple” requested was not used to arrive to the valuation of International Consumer.
[***]
The country or regional business-level selected market multiples are as follows for International Consumer:
[***]
Securities & Banking
Under the market approach for valuing this reporting unit as of February 29, 2008, the earnings multiples and transaction multiples were selected from multiples obtained using data from guideline companies and acquisitions. The selection of the actual multiple considers operating performance and financial condition such as return on equity and net income growth of Securities and Banking as compared to the guideline companies and acquisitions. The Company arrived at the selected market multiples below with the assistance of an independent valuation specialist.
[***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment.
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[***]
Global Transaction Services
Under the market approach for valuing this reporting unit as of February 29, 2008, the average multiple based on a range of multiples determined by 2008 estimated earnings of comparable companies was selected.
[***]
Smith Barney and Private Bank
The February 29, 2008 valuations for the Smith Barney and Private Bank reporting units were based on the average market multiple based on a range of multiples determined from estimated earnings and revenues of comparable companies (for 2008, 2009 and 2010), and the average implied earnings and revenues multiples from precedent transactions involving companies similar to Smith Barney and Private Bank, respectively.
[***]
[***]
[***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment.
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Citigroup Alternative Investments (CAI)
The CAI fair value as of February 29, 2008 was based on the fair value of proprietary capital portfolio (fair value of assets less fair value of liabilities) plus the fair value of the management company based on the market approach. The selected multiple under the market approach for the management company component of CAI was based on the median forward multiple determined from estimated earnings (for 2008 and 2009) for selected alternative asset managers.
[***]
· Please provide us a description for how each market multiple was selected and if any adjustments were made to the comparable company multiples.
Citigroup’s Response:
US Consumer – February 29, 2008 test
The selected multiple under the market approach for each business component (cards, retail banking, commercial business, and consumer lending) of US Consumer was based on the median multiple determined from actual 2007 earnings and estimated 2008 earnings. No adjustments were made to the price, earnings or revenues of the comparable companies.
International Consumer – February 29, 2008 test
The market approach was performed on a country or regional level for each business component (cards, retail banking and consumer finance) of International Consumer in order to identify a group of comparable companies. The selected multiple under the market approach for each business component of International Consumer was based on the median multiple as determined from actual 2007 earnings and estimated 2008 earnings. No adjustments were made to the price, earnings or revenues of the comparable companies.
Securities & Banking – February 29, 2008 test
Citigroup engaged the services of an independent valuation specialist to assist in the Company’s valuation of the Securities & Banking reporting unit. The valuation specialist first identified (1) a group of selected publicly traded companies (“guideline companies”), and (2) group of selected companies that were deemed comparable to Securities & Banking and were acquired (“guideline
[***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment.
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acquisitions”). The range of multiples for the guideline companies and guideline acquisitions was then established by the Company with the assistance of the independent valuation specialist based on multiples of earnings and tangible common equity. Ultimately, multiples for Securities & Banking were selected from the ranges based on the Company’s operating performance and financial condition relative to guideline companies and guideline acquisitions. Measures of operating performance and financial condition, such as return on equity and net income growth rates, were used for purposes of selecting the multiples from the range discussed above. No adjustments were made to the comparable company multiples for purposes of this analysis.
Global Transaction Services – February 29, 2008 test
The mid-point of the range of the multiples based on 2008 estimated earnings was selected under the market approach for Global Transaction Services. No adjustments were made to the price or earnings of comparable companies.
Smith Barney – February 29, 2008 test
The selected multiple under the market approach for Smith Barney was arrived at by equally weighting (1) the average market multiple based on a range of multiples determined from estimated earnings and revenues of comparable companies (for 2008, 2009 and 2010), and (2) the average implied earnings and revenues multiples from precedent transactions involving companies similar to Smith Barney. No adjustments were made to the price, earnings or revenues of comparable companies.
Private Bank – February 29, 2008 test
The selected multiple under the market approach for the Private Bank was arrived at by equally weighting (1) the average market multiple based on range of multiples determined from estimated earnings and revenues of comparable companies (for 2008, 2009 and 2010), and (2) the average implied earnings and revenues multiples from precedent transactions involving companies similar to the Private Bank. No adjustments were made to the price, earnings or revenues of comparable companies.
Citigroup Alternative Investments (CAI) – February 29, 2008 test
The CAI fair value was derived from the fair value of proprietary capital portfolio (fair value of assets less fair value of liabilities) plus the fair value of the management company based on the market approach. The selected multiple under the market approach for the management company component of CAI was based on the median forward multiple determined from estimated earnings (for 2008
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and 2009) for selected alternative asset managers. No adjustments were made to the price, earnings or revenues of the comparable companies.
· Please tell us if the multiples provided are minority-based multiples or control-based multiples. If they are control-based, please provide us the selected control premium.
Citigroup’s Response: The multiples used for Securities & Banking, Smith Barney, Private Bank and Citigroup Alternative Investments (management company only) were control-based multiples derived from control transaction multiples and giving consideration to the minority interest trading price multiples of comparative public companies.
For Securities & Banking, the transaction price-earnings multiples of the guideline acquisitions considered for this reporting unit ranged from 20.5x to 27.7x, with a mean of 23.1x and median of 22.2x trailing 12 months net income as of the closing date of the guideline acquisitions. All of these transactions were announced within the 12-month period preceding the valuation date (February 29, 2008). The minority trading price multiples of the public comparative companies were as follows:
[***]
In comparing the control multiples selected for Securities & Banking, the implied control premiums relative to the public guideline companies used for Securities & Banking for the February 29, 2008 test were:
[***]
[***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment.
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The implied control premium relative to public guideline companies used for Smith Barney, Private Bank and Citigroup Alternative Investments (management company only) for the February 29, 2008 test were:
[***]
[***]
[***]
The multiples used in the market approach for US Consumer, International Consumer and Global Transaction Services are minority-based multiples.
· The multiples provided appear to be “estimated multiples.” Please provide us a description of the source of the earnings estimates (based on individual analyst
[***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment.
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or consensus estimates) along with an approximate date for when the estimates were developed.
Citigroup’s Response: The multiples used for the February 29, 2008 test for the reporting units included in our response to comment 2 to your letter dated October 27, 2008 reflect consensus estimates. The estimates were obtained on or shortly after the testing date of February 29, 2008 and were based on the most current information available at the time of completion of the fair value analysis for each individual reporting unit.
For Securities & Banking, the earnings estimates were analyst consensus estimates derived from Bloomberg. For Global Transaction Services, the earnings estimates were derived from Thomson Financial. For Smith Barney, the average a
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CORRESP 1 filename1.htm CITI 1 FOIA Confidential Treatment Requested by Citigroup Inc. March 3, 2009 Kevin W. Vaughn Branch Chief Securities and Exchange Commission 100 F Street, N.E. Mail Stop 4561 Washington, D.C. 20549 RE: Citigroup Inc. Form 10-K for Fiscal Year Ended December 31, 2007 Forms 10-Q for 2008 File No. 001-09924 Dear Mr. Vaughn: Enhancement of the overall disclosures in filings by Citigroup Inc. (“Citigroup,” the “Company,” or “we”) is an objective that we share with the Staff and one that we consider in all our filings. This letter sets forth the responses of Citigroup to the comments of the staff of the U.S. Securities and Exchange Commission (SEC) contained in your letter dated January 14, 2009. 2007 Form 10-K Municipal Securities Tender Option Bond (TOB) Trusts, page 92 1. We note your response to comment 1 to our letter dated October 27, 2008. Please clarify your response for us by specifically quantifying the total amount of TOB trusts for which you obtained insurance subsequent to establishing the trusts. Additionally, please tell us whether you have other QSPE’s (unrelated to Tender Option Bond Trusts) where you have used similar logic described in your response to comment 1D and concluded that QSPE status was not impacted by the changes CITI 2 FOIA Confidential Treatment Requested by Citigroup Inc. Kevin W. Vaughn March 3, 2009 Page 2 of 17 made. If so, please describe the circumstances surrounding the changes and amendments, and quantify the amount of QSPE’s impacted. Citigroup’s Response: The fair value of the bonds owned by QSPE TOB trusts that obtained insurance subsequent to their establishment was approximately [***] at December 31, 2008. We do not have other QSPEs to which similar logic was applied to conclude that qualifying status was unaffected by changes made to the governing documents. Financial Statements Note 4. Business Segments, page 128 2. Please refer to your response to prior comment 2 to our letter dated October 27, 2008 and provide us with the following information regarding reporting units for each period beginning in Q4 2007 through 2008 where a goodwill impairment test was performed: · The fair value of each of your reporting units; and · The carrying value of each of your reporting units. Citigroup’s Response: During the period beginning in Q4 2007 through Q4 2008, a goodwill impairment test was performed for the reporting units and dates listed below (in billions USD): [***] [***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment. CITI 3 FOIA Confidential Treatment Requested by Citigroup Inc. Kevin W. Vaughn March 3, 2009 Page 3 of 17 [***] 3. Please refer to your response to comment 2 to our letter dated October 27, 2008 and address the following regarding your valuation methodologies. Market Approach · Please provide us the selected market multiple and/or the implied DCF multiple for each reporting unit. Citigroup’s Response: In reference to our response to comment 2 to the letter dated October 27, 2008, the market approach multiples used as part of the reporting unit valuations, or implied from the reporting unit valuations, performed as of February 29, 2008 are as follows: [***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment. CITI 4 FOIA Confidential Treatment Requested by Citigroup Inc. Kevin W. Vaughn March 3, 2009 Page 4 of 17 Market Approach Multiples – February 29, 2008 Test US Consumer The February 29, 2008 valuation for the US Consumer reporting unit was based on the sum of business level valuations (Cards, Retail Banking, Commercial Business and Consumer Lending), which were derived using the market approach. The selected market multiple for each business component of US Consumer was the average multiple based on a range of multiples determined from actual 2007 earnings and estimated 2008 earnings of comparable companies. In response to the question regarding the selected market multiple and/or the implied DCF multiple for each reporting unit, the “implied multiple” below was derived taking the sum of the business level valuations divided by the actual 2007 earnings and the estimated 2008 earnings. However, since the value was derived as a sum of business level valuations, the “implied multiple” requested was not used to arrive to the valuation of US Consumer. [***] The business level selected market multiples are as follows for US Consumer: [***] International Consumer The February 29, 2008 valuation for the International Consumer reporting unit was based on the sum of business level valuations (Cards, Retail Banking, Commercial Business and Consumer Lending) performed on a country or regional level, which were derived using the market approach. The selected market multiple for each country or regional business component of International Consumer was the average multiple based on a range of multiples determined from actual 2007 earnings and estimated 2008 earnings of comparable companies. In response to the question regarding the selected market multiple and/or the implied DCF multiple for each reporting unit, the “implied multiple” below was derived taking the sum of the business level valuations divided by the actual 2007 [***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment. CITI 5 FOIA Confidential Treatment Requested by Citigroup Inc. Kevin W. Vaughn March 3, 2009 Page 5 of 17 earnings and the estimated 2008 earnings. However, since the value was derived as a sum of business level valuations, the “implied multiple” requested was not used to arrive to the valuation of International Consumer. [***] The country or regional business-level selected market multiples are as follows for International Consumer: [***] Securities & Banking Under the market approach for valuing this reporting unit as of February 29, 2008, the earnings multiples and transaction multiples were selected from multiples obtained using data from guideline companies and acquisitions. The selection of the actual multiple considers operating performance and financial condition such as return on equity and net income growth of Securities and Banking as compared to the guideline companies and acquisitions. The Company arrived at the selected market multiples below with the assistance of an independent valuation specialist. [***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment. CITI 6 FOIA Confidential Treatment Requested by Citigroup Inc. Kevin W. Vaughn March 3, 2009 Page 6 of 17 [***] Global Transaction Services Under the market approach for valuing this reporting unit as of February 29, 2008, the average multiple based on a range of multiples determined by 2008 estimated earnings of comparable companies was selected. [***] Smith Barney and Private Bank The February 29, 2008 valuations for the Smith Barney and Private Bank reporting units were based on the average market multiple based on a range of multiples determined from estimated earnings and revenues of comparable companies (for 2008, 2009 and 2010), and the average implied earnings and revenues multiples from precedent transactions involving companies similar to Smith Barney and Private Bank, respectively. [***] [***] [***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment. CITI 7 FOIA Confidential Treatment Requested by Citigroup Inc. Kevin W. Vaughn March 3, 2009 Page 7 of 17 Citigroup Alternative Investments (CAI) The CAI fair value as of February 29, 2008 was based on the fair value of proprietary capital portfolio (fair value of assets less fair value of liabilities) plus the fair value of the management company based on the market approach. The selected multiple under the market approach for the management company component of CAI was based on the median forward multiple determined from estimated earnings (for 2008 and 2009) for selected alternative asset managers. [***] · Please provide us a description for how each market multiple was selected and if any adjustments were made to the comparable company multiples. Citigroup’s Response: US Consumer – February 29, 2008 test The selected multiple under the market approach for each business component (cards, retail banking, commercial business, and consumer lending) of US Consumer was based on the median multiple determined from actual 2007 earnings and estimated 2008 earnings. No adjustments were made to the price, earnings or revenues of the comparable companies. International Consumer – February 29, 2008 test The market approach was performed on a country or regional level for each business component (cards, retail banking and consumer finance) of International Consumer in order to identify a group of comparable companies. The selected multiple under the market approach for each business component of International Consumer was based on the median multiple as determined from actual 2007 earnings and estimated 2008 earnings. No adjustments were made to the price, earnings or revenues of the comparable companies. Securities & Banking – February 29, 2008 test Citigroup engaged the services of an independent valuation specialist to assist in the Company’s valuation of the Securities & Banking reporting unit. The valuation specialist first identified (1) a group of selected publicly traded companies (“guideline companies”), and (2) group of selected companies that were deemed comparable to Securities & Banking and were acquired (“guideline [***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment. CITI 8 FOIA Confidential Treatment Requested by Citigroup Inc. Kevin W. Vaughn March 3, 2009 Page 8 of 17 acquisitions”). The range of multiples for the guideline companies and guideline acquisitions was then established by the Company with the assistance of the independent valuation specialist based on multiples of earnings and tangible common equity. Ultimately, multiples for Securities & Banking were selected from the ranges based on the Company’s operating performance and financial condition relative to guideline companies and guideline acquisitions. Measures of operating performance and financial condition, such as return on equity and net income growth rates, were used for purposes of selecting the multiples from the range discussed above. No adjustments were made to the comparable company multiples for purposes of this analysis. Global Transaction Services – February 29, 2008 test The mid-point of the range of the multiples based on 2008 estimated earnings was selected under the market approach for Global Transaction Services. No adjustments were made to the price or earnings of comparable companies. Smith Barney – February 29, 2008 test The selected multiple under the market approach for Smith Barney was arrived at by equally weighting (1) the average market multiple based on a range of multiples determined from estimated earnings and revenues of comparable companies (for 2008, 2009 and 2010), and (2) the average implied earnings and revenues multiples from precedent transactions involving companies similar to Smith Barney. No adjustments were made to the price, earnings or revenues of comparable companies. Private Bank – February 29, 2008 test The selected multiple under the market approach for the Private Bank was arrived at by equally weighting (1) the average market multiple based on range of multiples determined from estimated earnings and revenues of comparable companies (for 2008, 2009 and 2010), and (2) the average implied earnings and revenues multiples from precedent transactions involving companies similar to the Private Bank. No adjustments were made to the price, earnings or revenues of comparable companies. Citigroup Alternative Investments (CAI) – February 29, 2008 test The CAI fair value was derived from the fair value of proprietary capital portfolio (fair value of assets less fair value of liabilities) plus the fair value of the management company based on the market approach. The selected multiple under the market approach for the management company component of CAI was based on the median forward multiple determined from estimated earnings (for 2008 CITI 9 FOIA Confidential Treatment Requested by Citigroup Inc. Kevin W. Vaughn March 3, 2009 Page 9 of 17 and 2009) for selected alternative asset managers. No adjustments were made to the price, earnings or revenues of the comparable companies. · Please tell us if the multiples provided are minority-based multiples or control-based multiples. If they are control-based, please provide us the selected control premium. Citigroup’s Response: The multiples used for Securities & Banking, Smith Barney, Private Bank and Citigroup Alternative Investments (management company only) were control-based multiples derived from control transaction multiples and giving consideration to the minority interest trading price multiples of comparative public companies. For Securities & Banking, the transaction price-earnings multiples of the guideline acquisitions considered for this reporting unit ranged from 20.5x to 27.7x, with a mean of 23.1x and median of 22.2x trailing 12 months net income as of the closing date of the guideline acquisitions. All of these transactions were announced within the 12-month period preceding the valuation date (February 29, 2008). The minority trading price multiples of the public comparative companies were as follows: [***] In comparing the control multiples selected for Securities & Banking, the implied control premiums relative to the public guideline companies used for Securities & Banking for the February 29, 2008 test were: [***] [***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment. CITI 10 FOIA Confidential Treatment Requested by Citigroup Inc. Kevin W. Vaughn March 3, 2009 Page 10 of 17 The implied control premium relative to public guideline companies used for Smith Barney, Private Bank and Citigroup Alternative Investments (management company only) for the February 29, 2008 test were: [***] [***] [***] The multiples used in the market approach for US Consumer, International Consumer and Global Transaction Services are minority-based multiples. · The multiples provided appear to be “estimated multiples.” Please provide us a description of the source of the earnings estimates (based on individual analyst [***] The following information has been redacted in accordance with Citigroup’s request for confidential treatment. CITI 11 FOIA Confidential Treatment Requested by Citigroup Inc. Kevin W. Vaughn March 3, 2009 Page 11 of 17 or consensus estimates) along with an approximate date for when the estimates were developed. Citigroup’s Response: The multiples used for the February 29, 2008 test for the reporting units included in our response to comment 2 to your letter dated October 27, 2008 reflect consensus estimates. The estimates were obtained on or shortly after the testing date of February 29, 2008 and were based on the most current information available at the time of completion of the fair value analysis for each individual reporting unit. For Securities & Banking, the earnings estimates were analyst consensus estimates derived from Bloomberg. For Global Transaction Services, the earnings estimates were derived from Thomson Financial. For Smith Barney, the average a