Citigroup hopes to roll out soon a new asset-backed securities structure that would allow the bank to sell deeply subordinated tranches of its credit card deals into the public market for the first time.

The public market debut of these subordinated pieces, which have traditionally been consigned to the private market, is expected to greatly expand the investor base for the securities in the tranches and also reduce deal costs for the issuer.

"It's another step in their drive to become indistinguishable from a corporate bond issuer," said one ABS source.

Citibank recently filed a shelf with the Securities and Exchange Commission for the introduction of the new structure, and expects to receive comments about the structure in the next week. Once it has SEC approval in hand, sources said the bank would likely issue an inaugural deal soon afterward.

"They will have the ability to offer large and relatively liquid class B and C tranches which will allow them to be a lot more opportunistic with their issuance of senior securities," said the same source.

ABS market players expect there could be a substantial impact from Citibank being able to offer public C-pieces to accounts that, due to their charters, formerly could not buy the tranches in the private market.

"This is the elephant everyone's keeping an eye on," said one securities analyst. "They've come up with this new structure to issue more Erisa-eligible deals and create subordinate bonds which will be large and liquid and will allow them to do something different."

As a result, sources expect rival credit card issuers like MBNA Inc. and First USA to emulate the Citibank structure, or to get tips from both Citibank and Chase Manhattan Bank, which unveiled a similar structure last year. Both MBNA and First USA in the past have issued deals with subordinate tranches available to certain Erisa-eligible buyers like insurance companies, but have yet to offer a full-fledged public deal.

Of further debate is whether the new structure will enable Citibank to pump up its securitized credit card volume, which would benefit the status of bookrunner Salomon Smith Barney, already a strong candidate to dominate the ABS market in the next decade.

During 1999, Salomon ranked second in asset-backed securities underwritten, with $35.3 billion in proceeds, up from fourth place and $28.3 billion in the previous year, according to Thomson Financial Securities Data. With current market leader Credit Suisse First Boston having won first-place laurels with $2.4 billion in additional proceeds, a new and improved credit card operation could tighten the competition, observers said.

Not everyone is convinced the new structure will make or break Salomon's league table rank, as some analysts believe the key benefit the structure will provide is better pricing for the issuer. Even sources at Citibank concede that the structure may not have much of an impact in terms of volume increases.

But Citibank's proposed structure will allow the bank to offer much larger and liquid B and C tranches. For example, in 1999 the bank issued about $6.8 billion in senior credit card notes and $400 million in B tranches. Given the new method of issuing deals, the volume of B tranches should rise dramatically, as should that of C tranches. Privately placed subordinate bonds will become very rare, by contrast.

The Citibank structure follows in the wake of Chase's inaugural credit card securitization using its structure, a $965.9 million deal that priced last summer and was a hit with investors. In that deal, the $67.5 million "C" tranche garnered its share of first-time investors who normally shun or are prohibited from buying in the private subordinate bond market and priced at 95 basis points over the one-month London Interbank Offered Rate.

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