Inflation Fueled Interest Rates Trigger Strong Demand For Citrix Debt

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  • Banks seeking to sell some of the debt backing the $16.5 billion leveraged buyout of Citrix Systems Inc CTXS to investors saw more demand than they could fill, Reuters reports.
  • Banks led by Bank of America Corp BACCredit Suisse Group CS, and Goldman Sachs Group Inc GS agreed to provide $15 billion in junk-rated debt to investment firms Vista Equity Partners and Elliott Investment Management LP for the acquisition of Citrix.
  • In January, Vista and Evergreen Coast Capital affiliates agreed to acquire Citrix in an all-cash transaction valued at $16.5 billion, including debt at a 30% premium.
  • The inflation-induced central bank interest rate hikes made the Citrix debt appear cheaper, forcing banks to discount it in the syndication.
  • The banks syndicated only a slice of the $15 billion Citrix debt package. 
  • They are marketing a $4.05 billion term loan with an annual interest rate of 450 basis points over the SOFR benchmark. 
  • Their books taking orders for that loan have been oversubscribed.
  • The banks discounted the loan to $0.92 on the dollar, leading to a potential collective loss of millions. 
  • But the strong demand for it, likely fueled by optimism over stabilizing the junk debt market, may lead to offloading the debt at a smaller discount or selling more than they originally planned.
  • The banks look to offload a $500 million equivalent euro loan, a $3.5 billion bank tranche, and a $3.95 billion second-lien term loan.
  • They also plan to sell some $3 billion in Citrix bonds to investors next week.
  • The junk debt market jitters weighed on the ability of private equity firms to clinch new acquisitions.
  • Price Action: CTXS shares closed lower by 0.02% at $103.68 on Friday.
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