Market Wrap
Citrix bankers test appetite for long-awaited LBO debt
- David Bell
- +William Hoffman
- + 1 more
•2 min read
Bankers are reaching out to buysiders to gauge appetite for Citrix Systems’ buyout debt, and may look to officially launch syndication as soon as next week, according to 9fin sources.
The $16.5bn buyout has been hanging over the primary leveraged finance market since Vista Equity Partners and Evergreen Coast Capital (a subsidiary of Elliott Management) announced the deal in January.
A syndicate of investment banks led by Bank of America provided committed financing for the deal. Bankers are now giving certain investors early looks at this debt, and are guiding towards an official syndication potentially within the next two weeks, said three sources.
Pricing is expected to be heavily discounted, given how much borrowing costs have risen since the debt was underwritten. As such, BofA and its fellow underwriters could lose money when placing the debt with external investors (see our recent podcast for more on this topic).
Last month, Bloomberg reported that banks could face losses of up to $1bn on the Citrix deal. The full syndicate includes Credit Suisse, Goldman Sachs, Barclays, Citi, Deutsche Bank, KKR Capital Markets, Mizuho, Morgan Stanley and RBC Capital Markets.
The Citrix transaction is one of several large LBOs that were underwritten before borrowing costs began to climb dramatically in February. In recent weeks, banks have had to offer huge discounts to offload such debt for the likes of Intertape Polymer and BBB Industries.
Even in strong markets, a deal of this size would likely be a challenge for the leveraged finance market to price and absorb. In addition to the tough market backdrop, the transaction comes at a pivotal time for Citrix’s business (see 9fin’s deep dive on the deal here).
The major issue, though, is pricing — the average yield on high yield bonds has blown out to 8.8%, compared with 5.2% when the deal was signed, according to ICE BofA. Leveraged loans have also sold off dramatically, with recent syndications clearing at OIDs in the low 90s.
In April, Bloomberg reported that a group of investors led by Apollo had offered to take down $4bn of the secured portion of Citrix’s LBO debt. This is one of several deals where private credit funds have intervened in recent months (here’s a link to our long read on this trend).
In addition to Citrix, other underwritten LBO paper that is expected to hit the market soon includes debt backing Nielsen’s $16bn acquisition by a consortium led by Evergreen and Brookfield, and Apollo’s $7.1bn acquisition of Tenneco.
BofA declined to comment. Citrix did not immediately respond to a request for comment.
