Citicorp will proceed with an offering of $650 million in convertible preferred stock, although reports of problems at its mortgage unit may make the sale more difficult.

On Aug. 7, Citicorp filed with the Securities and Exchange Commission to issue 32.5 million shares of preferred equity redemption cumulative stock, known as Percs, through Morgan Stanley & Co. The offering is a key element in Citicorp's long effort to rebuild capital.

"The information that has been appearing includes nothing new and therefore would have no bearing on the Percs," a Citicorp spokesman said.

Busy Days for John Reed

Market sources said the road show for the offering probably would not start until after the Sept. 15 meeting of Citicorp's board, because chairman John Reed is to participate in the presentation to investors.

The harshness of a report about Citicorp Mortgage Inc. by examiners for the Office of the Comptroller of the Currency, reported in The New York Times and The Wall Street Journal Thursday, raised questions among some investors and analysts about whether Citicorp should have disclosed information about the problems in the registration statement for the Percs.

"At the very least, the stories make their sale [of Percs] more difficult," said an investment banker.

In a statement, Citicorp said the news reports did not contain material information requiring disclosure.

Seen as |Symptomatic'

Benedict Capaldi Jr., a vice president at Brandywine Asset Management, a pension portfolio manager, said the information in the news stories "in my opinion is a material event, to the extent this is symptomatic of how Citi has managed its businesses over the last several years, living on the edge, being more aggressive than others."

Although it invests in other bank stocks, Brandywine last held Citicorp shares in 1989, Mr. Capaldi said.

"It is evidence that Citicorp has a very poor management that cannot control the various subsidiaries," said an analyst at an institution that has major holdings of Citicorp stock.

Percs shares pay a fixed dividend and automatically convert into common stock at the end of three years. They differ from simple convertible preferred in that a Percs share converts into fewer common shares as the common rises in prices.

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