Citrix Systems (NASDAQ:CTXS) – 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. CTX Investors saw more demand than they could meet, Reuters reports.
  • The banks run by Bank of America Corp BAC, Credit Suisse Group CSand Goldman Sachs Group Inc. GS agreed to provide $15 billion in venture debt to investment firms Vista Equity Partners and Elliott Investment Management LP for the acquisition of Citrix.
  • In January, subsidiaries of Vista and Evergreen Coast Capital agreed to acquire Citrix in an all-cash transaction valued at $16.5 billion, including debt at a 30% premium.
  • Inflation-induced central bank interest rate hikes made Citrix debt appear cheaper, forcing banks to discount it in syndication.
  • The banks syndicated only a slice of Citrix’s $15 billion debt package.
  • They are marketing a $4.05 billion term loan with an annual interest rate 450 basis points above the SOFR benchmark.
  • Their books taking orders for this loan were oversubscribed.
  • The banks reduced the loan to $0.92 per dollar, resulting in a potential collective loss of millions.
  • But strong demand, likely fueled by optimism that the junk debt market is stabilizing, could lead to debt being offloaded at a lower discount or more being sold than initially expected.
  • The banks are seeking to offload a $500 million equivalent euro loan, a bank tranche of $3.5 billion and a second lien term loan of $3.95 billion.
  • They also plan to sell some $3 billion worth of Citrix bonds to investors next week.
  • Jitters in the junk debt market weighed on the ability of private equity firms to make new acquisitions.
  • Price action: CTXS shares closed down 0.02% at $103.68 on Friday.

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