Citrix Programs brand is seen on smartphone positioned on U.S. {Dollars} on this illustration taken, January 31, 2022. REUTERS/Dado Ruvic/Illustration
Sept 9 (Reuters) – Banks searching for to promote a few of the debt backing the $16.5 billion leveraged buyout of enterprise software program firm Citrix Programs Inc (CTXS.O) to traders have acquired extra demand than they will fill, elevating the prospect they might undergo a smaller loss than anticipated, folks conversant in the matter mentioned on Friday.
Banks led by Financial institution of America Corp (BAC.N), Credit score Suisse Group AG (CSGN.S) and Goldman Sachs Group Inc (GS.N) agreed in January to supply $15 billion in junk-rated debt to funding corporations Vista Fairness Companions and Elliott Funding Administration LP for the acquisition of Citrix.
As with all such offers, the banks syndicate the debt to traders to get it off their books and recycle their capital. However the market turned following the signing of the deal, as rampant inflation led central banks to jack up rates of interest.
This made the Citrix debt look too low-cost within the eyes of traders, forcing banks to low cost it within the syndication. The deal has grow to be a key check for banks which can be requested to finance huge leveraged buyouts. Many are ready for the end result of the Citrix syndication earlier than making new debt commitments.
The banks are at the moment syndicating solely a slice of the $15 billion Citrix debt bundle as they gauge investor demand. They’re advertising and marketing a $4.05 billion time period mortgage with an annual rate of interest of 450 foundation factors over the SOFR benchmark, the sources mentioned. Their books taking orders for that mortgage have been oversubscribed, the sources added.
The banks discounted the mortgage to 92 cents on the greenback, which might result in a collective loss for them of lots of of thousands and thousands of {dollars}, the sources added. However the sturdy demand for it, possible fueled by investor optimism that the junk debt market is stabilizing, might outcome within the banks offloading the debt at a smaller low cost or promoting greater than they initially deliberate in order that they have much less of it to promote down the road, in line with the sources.
It’s also doable that the banks proceed to promote the debt as initially marketed to the traders, the sources mentioned, requesting anonymity as a result of the matter is confidential. Financial institution of America, Credit score Suisse and Goldman Sachs declined to remark.
Buyers have till Sept. 19 to decide to the Citrix mortgage.
The banks nonetheless have extra Citrix debt sitting on their books they want to offload to traders. This features a $500 million-equivalent euro mortgage, in addition to a $3.5 billion financial institution tranche and a $3.95 billion second-lien time period mortgage. The banks additionally plan to promote some $3 billion in Citrix bonds to traders subsequent week.
Most banks have been holding leveraged buyout debt on their books till the market improves. Solely a handful of loans have been syndicated this yr at a major low cost. This contains drugmaker Covis Pharma’s $595 million time period mortgage that was offered in February at 90 cents on the greenback.
The junk debt market jitters have weighed on the flexibility of personal fairness corporations to clinch new acquisitions. One instance has been NCR Corp (NCR.N), a producer of money registers and automatic teller machines with a $4.3 billion market capitalization that buyout agency Veritas Capital has struggled to barter a cope with, partly due to the issue of securing sufficient debt for an acquisition, in line with folks conversant in the matter.
Reporting by Matt Tracy in Washington and Abigail Summerville in New York; Modifying by Greg Roumeliotis and Jonathan Oatis
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