Inflation Fueled Interest Rates Trigger Strong Demand For Citrix Debt

  • 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.
Market News and Data brought to you by Benzinga APIs
Posted In: NewsTechMediaBriefs
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!