“We’re playing to win,” Citigroup chief executive Jane Fraser told the troops in the investment bank in a memo to staff as she announced the deepest restructuring of the group in more than a decade. Fraser has organised Citi’s banking franchise around three lines of business: investment banking under Tyler Dickson; corporate banking under Jason Rekate; and commercial banking under Tasnim Ghiawadwala. All three now report directly to Fraser, as does Andrew Morton, head of markets. The aim is to deeply intertwine Citi’s investment bank with its global network of payments, lending and capital markets – providing greater value to customers and increasing the bank’s profitability. “I ask that you embrace the opportunity to focus on where you can have the most impact and gear up for the turn,” she said in the memo seen by IFR. Fraser said the new structure in its investment bank frees up bankers to focus on the expected bounce-back in deal activity without the multitude of other responsibilities. Against the wind The turn comes at a difficult moment for Citi. The wind has not been at its back in a long time and the bank has ceded ground in areas where it has had historic weakness, but also in areas it considered its core strength. In debt capital markets, Citi has seen its global market share erode in the last couple of years, falling to 3.8% last year. Bank of America edged ahead to become the number two DCM bank, breaking up the consistent one-two ranking of JP Morgan and Citi since 2018. Citi is also giving up market share in DCM in the US. BofA surged ahead of Citi in 2022 and is now number one in the US, overtaking JP Morgan. There is some good news for Citi this year, however, as the gap between first and third has narrowed. In M&A, all rivals struggle against Goldman Sachs, but Citi's footprint is shrinking. It is taking half the number of deals as Goldman with half the transaction value. And while JP Morgan and Morgan Stanley have closed the once cavernous gap between themselves and Goldman, in the US, Citi has been knocked out of the top five M&A rankings this year by Centerview Partners. Citi’s market share in the US is the weakest it’s been in years. Then there’s ECM. Citi consistently trails US rivals with nearly 40% fewer assignments in the US last year than market leader JP Morgan, and that gap has widened to nearly 50% this year. The average size of Citi's deals is smaller too. In lending, Citi’s top three position was challenged last year by Wells Fargo. Despite falling to fourth on syndicated lending tables, Citi’s market share grew last year to 6%, and this year Citi is back in third behind JP Morgan and BofA. The mix of problems in advisory and underwriting saw Citi’s investment banking fees in the second quarter slump to their lowest level for any quarter for 15 years. That may in part be because Citi bankers have said the “winning” strategy for the bank is not necessarily to chase league table credit, but profitable business. But it is part of a decline over many years. All Wall Street banks have had a tough 18 months, but Citi's investment banking revenues in the first half fell to US$1.4bn, less than half the level of JP Morgan and Goldman. More alarmingly, Citi's revenues were down 46% from the first half of 2018, compared with an average 20% decline at the other four big US banks, according to IFR calculations. “We’re not afraid to take the hard steps needed to strengthen our franchise,” Fraser said. “We’re executing a deliberate plan, and we’ve acted swiftly and decisively to respond to the headwinds we’ve faced without deviating from our strategy and priorities. “Our investment bank has invested heavily in talent in recent years and will continue to do so,” she said. “We believe strongly in our ability to capture significant share when the

The unpredictable and often elusive greenium – or green premium – that issuers can gain by issuing ESG-labelled rather than conventional bonds is being seen consistently in more ESG formats that could lead to increased issuance. Last year, on average there was little tangible pricing benefit to ESG-labelled bonds as issuers struggled to access turbulent markets but the greenium is now averaging 5bp on euro-denominated ESG-labelled corporate bonds, according to banks and investors. "It's great news that the greenium is back. In the first quarter the greenium was 4bp on average for ESG-labelled bonds, 4bp in the second quarter, and 5bp in the third quarter so far," said Amanda Vainio, head of sustainable financing for EMEA at MUFG. "We see that as a message that we're moving into more stable markets again after last year and investors have been able to focus their attention again a bit more on the value of ESG." Greeniums reflect additional demand for ESG-labelled bonds over conventional deals. They are notoriously difficult to calculate due to a wide range of variables involved in bond curves and different methodologies used to capture the often disputed metric. They also vary over time and by issuer and sector, and the credibility of companies' ESG offerings. They are also influenced by market conditions as well as more technical factors including initial pricing, competing supply and scarcity. "The greenium is circa 5bp and it seems to be fairly well anchored there, but there is a really big range for issuers – it can be up to 15bp for some bonds and the same in the other direction for others. It's naturally larger at the long end for high-quality paper," said Johnathan Owen, a portfolio manager at TwentyFour Asset Management. Although most discussion of the greenium focuses on corporates, slightly smaller greeniums are also seen in the SSA space. JP Morgan said in August that most of the euro area sovereign green bonds were trading with a greenium compared with conventional bonds. “New issue premiums can be up to 5bp lower for ESG-labelled bonds than non-labelled bonds in the corporate sector and around 1bp–2bp lower in the SSA sector,” said Harpreet Parhar, head of ESG syndicate at Credit Agricole. India's record launch greenium of 6bp in February appears to have narrowed, Denmark's 5bp greenium is now 2bp and the UK's has disappeared completely following the rollback of some of its commitments in its net-zero plans. Sustainium Greeniums are most visible on green bonds rather than other types of use-of-proceeds bonds but pricing benefits are increasingly visible on sustainability-linked bonds as issuance picks up and more robust and credible deals are printed. "Well-structured SLBs with ambitious, meaningful and relevant KPIs can help to increase an issuer’s ESG profile and could help to drive tighter pricing via a larger order book," Parhar said. SLB premiums are even harder to calculate than green bonds due to smaller volumes of issuance and lower demand for the transition instrument from ESG investors, but are also slightly below those for green bonds. Research by the Copenhagen Business School and the University of Strathclyde puts the SLB premium, dubbed a"sustainium", at 4bp–7bp. "Every quarter this year the greenium has been bigger for use-of-proceeds bonds than for SLBs. What we see in the third quarter is 5bp for use-of-proceeds bonds and a 4bp greenium for SLBs," Vainio said. Owen also put the SLB premium at 1bp–2bp below green bonds. Here today... Although greeniums are not the prime motivation for ESG issuance, as borrowers prioritise sustainability strategies, they are undeniably attractive to some issuers, particularly those in emerging markets. However, greeniums cannot be guaranteed and are also prone to disappearing during times of heightened market volatility, if "stickier" ESG investors that trade infrequently sell. Investors are therefore targ

India’s M&A market has burst into activity, with two deals promising to lead to debt financings totalling US$9bn–$9.5bn, and a variety of fundraising options being considered given the large sizes involved. JSW Steel and Torrent Pharmaceuticals are at the centre of the action. The steelmaker is eyeing a 20%–40% stake in Canadian company Teck Resources’ metallurgical coal unit Elk Valley Resources, which could lead to debt financing of at least US$5bn–$5.5bn. Torrent is the frontrunner in the race to acquire an initial 33.4% stake in bigger rival Cipla from its founding family and is looking to raise up to US$4bn. The proposed acquisitions and related financings would be the largest by both JSW Steel and Torrent – and they face challenges. “Both deals are very large and in their early stages, so there are quite a few moving parts,” said a senior loan banker in Singapore, whose bank is hoping for a role in both financings. “We are looking at a mix of financing options as these deals will need to tap into different pools of liquidity to cross the finish line.” Steely business JSW Steel’s proposed acquisition of the stake in Elk Valley Resources will be through a consortium comprising Asian steelmakers that is expected to own 75% combined. JSW Steel is the dominant partner in the consortium, according to people familiar with the situation. The target has sizeable debt on its balance sheet, which potential lenders are looking to refinance through recourse and non-recourse loans. “The size of debt needed is large, at least US$5bn–$5.5bn,” said another senior loan banker in Singapore. “Apart from refinancing debt at the target, the sponsors in the consortium might also raise loans for their equity contributions. There are several possibilities – a term loan A in Asia or a term loan B or a bond in the US.” JSW Steel is no newcomer to outbound M&A or offshore loan markets, but the latest acquisition would be its biggest overseas. Its previous largest M&A loan was in 2008, when it raised US$950m of recourse and non-recourse financing to acquire 90% of three US-based companies – Jindal United Steel, Saw Pipes USA and Jindal Enterprises – from Jindal Saw for US$810m. JSW Steel had to navigate tough market conditions that forced it to flex pricing upwards on the recourse portions that were relaunched. JSW Steel faces different challenges this time, although market conditions are similarly tricky. Any non-recourse financing would have to contend with the state of the US TLB market, which has only recently shown signs of revival after months of volatility. On top of that, a diplomatic row between India and Canada after the latter’s accusation that India may have been involved in killing a Sikh separatist leader in Vancouver has led to tit-for-tat expulsions of officials from both countries. “Raising all of the debt on a non-recourse basis will be very expensive for JSW Steel,” said the first banker. “But first the geopolitical issue needs to be cleared. I hope it does not become a deal-breaker for the Indian company.” Environmental issues are also a factor as some banks are constrained from lending to any coal-related businesses. However, several bankers pointed out that Elk Valley Resources produces metallurgical coal, which is used in steelmaking, rather than thermal coal for power plants that is more damaging to the environment. Debt dosage Torrent’s pursuit of a controlling stake in Cipla could result in multiple fundraisings. The total consideration to buy the initial 33.4% stake, plus the maximum 26% for which it would have to make an additional tender offer, is expected to be north of US$8bn based on Cipla’s market capitalisation of Rs996.15bn (US$11.98bn). Torrent, India’s third-largest drugmaker, is looking to tap private equity and credit firms for financing. R

Defaulted property company Sunac China Holdings has secured approval from creditors to restructure its offshore debt of almost US$10bn, the first major Chinese developer to do so. Other restructurings have stalled or dragged on for months, including that of China Evergrande Group with almost US$20bn in offshore debt, and market participants are hopeful Sunac’s success will nudge others to wrap up their own efforts. “Sunac got their deal done, and others that are procrastinating should really follow. There’s no point hanging around on these deals,” said a restructuring adviser. On Monday, creditors holding 98.3% of the outstanding claims approved Sunac's restructuring plan, which will see part of its debt exchanged into mandatory convertible bonds, as well as new conventional notes, and some swapped for shares in Hong Kong-listed subsidiary Sunac Services Holdings. Sunac raised its cap on the MCBs to US$2.75bn in response to investor interest, after initially planning US$1.75bn. The response for the equity-related portions was overwhelming, with the company announcing on Friday that creditors submitted to exchange nearly US$4bn for the MCBs and US$1.34bn for Sunac Services shares. "The Sunac kind of success story ... is an indication of the kind of things that investors could potentially accept," said Jessica Zhou, a partner at law firm White & Case. "Investors are still looking at the quality of the underlying credit of whatever is offered up." The restructuring still needs Hong Kong court approval at a hearing scheduled for October 5. Houlihan Lokey (China) is financial adviser to the company and Sidley Austin is legal adviser. PJT Partners and Linklaters are advising an ad hoc group of creditors. Sources said Sunac's ability and willingness to give investors a menu of options in its restructuring helped speed up acceptance, as the diverse investor base had a range of needs, with some not being able to accept equity or take haircuts. "A menu plan fares well, and you see it in the voting results," said a source familiar with the situation, noting the options allowed investors to mix and match, and did not force a haircut. Other developers going through restructurings may not be able to replicate Sunac’s outcome completely as each faces a different balance of onshore and offshore debt, varying complexities of structures and debt-issuing entities, and a mix of long-only bondholders and distressed-debt buyers. But Sunac's success offers some lessons. Sandra Chow, co-head of Asia-Pacific research at CreditSights, called Sunac's approval a “positive step forward” and a “good blueprint” for other companies, as it used asset sales, a maturity extension and an equity component. “The company had more willingness to pay and wasn’t trying to squeeze [investors] too hard,” said Chow. Follow the playbook The restructuring adviser said a key difference between Sunac and other developers was Sunac’s willingness to manoeuvre through the restructuring process in a straightforward way, negotiating with the ad hoc investor group and following international norms. “They acted in a way in which they had a certain urgency, as much as the bondholders," the adviser said. "I’d give them better marks than any of the other guys in their willingness to get a deal done.” One property executive said it is especially hard to reach a consensus on Chinese restructurings because bondholders may have different goals and engage in talks individually, rather than as a group. Onshore and offshore investors also have conflicting views about what to accept in a proposal. Restructurings by Chinese property developers prior to Sunac have generally involved maturity extensions and reductions in coupons, rather than big changes to capital structures. “Most of the restructuring cases are buying time,” said the property executive. “Almost all issuers kno