Wall Street suffers $1.5bn loss on Citrix buyout loans

The Wall Street investment bank that funded the leveraged buyout of tech firm Citrix last year has sold the rest of the deal as the era of low interest rates was coming to an end, according to people familiar with the matter. , lost about $1.5 billion.

Goldman Sachs, Bank of America, Credit Suisse and 30 other lenders on Tuesday sold $3.84 billion in junior bonds backing the $16.5 billion acquisition of Citrix by Elliott Management and Vista Equity Partners.

The bonds are one of the last pieces in a multi-billion dollar financing package that banks kept on their own balance sheets after the crash in financial markets wreaked havoc on the Wall Street trading machine. is.

The bank sold the junior bonds at a hefty 21% discount, or about 79 cents on the dollar, according to people familiar with the matter. The bond, which matures in September 2029, has a yield of approximately 14%. The sale cost the bank approximately $675 million.

The deal with Citrix was closed in January 2022. This was just before the US Federal Reserve (Fed) began aggressively raising interest rates to keep inflation in check. The Federal Reserve’s action sent bond prices plummeting, causing painful losses for banks that agreed to lend at low interest rates.

The bank has failed to sell debt from several high-profile leveraged buyouts, including Elon Musk’s $44 billion acquisition of Twitter and Apollo’s $7.1 billion acquisition of auto parts maker Tenneco. In the case of Citrix, the bank was forced to put its own money into financing the acquisition last year.

Financial market turmoil and looming recession fears are making it difficult for private equity groups to find affordable buyout finance from banks. Instead, they are increasingly turning to private credit providers. Private credit providers were able to write larger loans as pension plans, endowments and sovereign wealth funds piled into their funding.

Some of the fund managers, including Carlyle and HPS Investment Partners, bought the new Citrix bond that was sold this week. Elliott also bought a portion of the bond, adding to his $1 billion investment in Citrix senior debt last year.

Goldman Sachs, Bank of America, Credit Suisse, Elliott and Vista declined to comment.

Goldman and its Wall Street counterparts have been attracting investors for months to find a buyer for the debt related to the Citrix acquisition.

Tuesday’s bond sale came after the bank sold $8.55 billion in bonds and loans last September and traded several blocks of Citrix term loans worth about $2 billion in December and January. will pay off most of the remaining Citrix debt on its balance sheet.

The bank lost more than $600 million in the September sale, materializing additional paper losses in block trades.

Marketing documents for the junior bonds obtained by the Financial Times this week say that Citrix has laid off about 15% of its workforce in an effort to push costs down in hopes of saving $485 million annually. S&P rated the bond a single B-minus among the riskiest ratings assigned by S&P.

S&P Global analyst Steven McDonald said the progress made by Citrix “reduced the risk of failed integrations and delayed cost reductions, while improving profitability and cash flow generation helped reduce leverage over time.” It strengthens our confidence that we will back it up.” .

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