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Banks Kick Off $4 Billion Citrix Bond Sale as Loan Draws Demand

·3 min read

(Bloomberg) -- Wall Street banks have kicked off the second part of a $15 billion debt package for the buyout of Citrix Systems Inc., as they look to offload risky loans they’ve been stuck with for months.

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A group of lenders led by Credit Suisse Group AG will hold an investor call for a $4 billion secured bond offering at 10:30 a.m. New York time on Tuesday, according to a person with knowledge of the matter. It follows the launch of a similarly sized leveraged loan offering last week that has already received enough demand to be sold.

The financing is widely seen as a bellwether for high-yield markets that have been under pressure for months due to recessions fears, and could help set the tone for the rest of the year as other large debt deals wait in the wings.

Read more: Citrix Buyout Deal Breaks the Ice for Troubled Junk Debt Markets

The secured bond deal was expected to be $3.5 billion in size, but has been increased on expectations that there is enough demand, according to different people with knowledge of the details, who asked not to be identified because discussions are private.

The banks had said they may hold $3 billion of the original $7.05 billion loan commitment prior to the bond increase, according to an offering memorandum sent to investors last week, which will be lowered to $2.5 billion if the larger bond is sold.

Representatives for Credit Suisse, Bank of America Corp., which is leading the loan sale, and Goldman Sachs Group Inc., which is leading the unsecured portion of the financing, declined to comment.

Struggle

Banks have been struggling to sell the Citrix debt commitments that they had agreed to provide in January to help finance the buyout of the software company by Vista Equity Partners and Elliott Investment Management.

Representatives for Vista, Elliott and Citrix didn’t immediately respond to requests for comment.

Since then, the cost of borrowing has spiked well above the maximum that the lenders had agreed to, forcing them to offer steep discounts to lure buyers, and leaving them on the hook for hundreds of millions of dollars in potential losses.

Lenders are waiting to see how Citrix goes before launching two other large transactions for the buyout of TV ratings company Nielsen Holdings and for auto parts firm Tenneco Inc.

Early pricing discussions floated during pre-marketing for the Citrix bonds, which mature in 6.5 years and may price on Sept. 19, were for a yield in the high 8% range, Bloomberg previously reported. Commitments on the loan, offered at a steep discounted price of 92 cents on the dollar, are due the same day.

The $3.95 billion of unsecured bond debt commitments have been turned into a second-lien loan. The debt financing also includes a $1 billion revolving credit facility, according to a January filing.

(Updates with details throughout.)

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