(Bloomberg) -- Private equity firms Vista Equity Partners and Elliott Investment Management plan to explore selling one of Citrix Systems Inc.’s businesses after they close on their buyout of the software company, to help repay relatively expensive financing.
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Citrix intends to look at selling Wrike, a startup that it acquired from Vista in 2021, after the buyout closes in late September. The timing was disclosed during a call on Thursday with potential loan investors. Citrix paid $2.25 billion for the project management company, and proceeds from a sale would help pay back $2.5 billion of preferred equity financing the buyout deal, people with knowledge of the call said, asking not to be named discussing a private transaction.
The preferred equity, which is separate from Citrix’s $15 billion of debt financing for the buyout, has an unusual feature: the holders of the securities have a special claim on any proceeds the company gets from selling Wrike, Bloomberg previously reported.
Read more: Oak Hill, Carlyle Found Way to Dodge Losses On Citrix Preferreds
Vista and Elliott are pitching debt investors their vision for the potential gains from taking Citrix private and combining it it with Vista portfolio company Tibco Software. Their plan includes cutting nearly 1,000 positions from the merged companies to cut costs.
This week Citrix launched the sale of a $4.05 billion loan and a separate euro-denominated portion equivalent to $500 million, a process set to continue through Sept. 19. A $3 billion secured bond portion is expected to launch in the coming days.
Representatives for Vista and Elliott declined to comment. Representatives for Bank of America Corp., which is leading the loan, and Citrix did not immediately respond to requests for comment.
Citrix’s preferred equity from the buyout is relatively expensive for the company, paying 12 percentage points over the Secured Overnight Financing Rate and originally sold at 97 cents on the dollar. In contrast, the dollar loan is expected to pay somewhere around 4.5 percentage points more than SOFR, and to be priced at 92 cents on the dollar.
Vista and Elliott say the combined Citrix and Tibco company can cut costs by $371 million annually, according to the people on the call. Achieving that savings will require one-time costs of around $200 million, including cutting about 955 positions, the people added. Some $145 million of those savings will come from the sales & marketing segment of the business, which accounts for about 450 of the job cuts, they said.
In addition to the $15 billion of debt originally intended to be sold to investors, Citrix will have a $1 billion revolving credit facility to be held by banks. The company plans to draw on part of that revolver, the people said, to help fund about half of the $200 million restructuring charges. Citrix expects to record those expenses over the next two quarters, they said.
The banks that committed to the loan sale have already received enough orders to sell the entire $4.05 billion US dollar portion. Investors are watching Citrix’s debt sales closely as a barometer of the market’s risk appetite amid issues like inflation, rising rates, high energy costs and geopolitical turmoil. If the offerings go well, other borrowers could be emboldened to also issue debt. If they go poorly, companies could hold off on selling junk bonds or leveraged loans.
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