(Bloomberg) — A group of banks led by Bank of America Corp. and Credit Suisse Group AG is being forced to offer even steeper discounts on more than half of the $15 billion debt package supporting the buyout of Citrix Systems Inc.
(Bloomberg) — A group of banks led by Bank of America Corp. and Credit Suisse Group AG is being forced to offer even steeper discounts on more than half of the $15 billion debt package supporting the buyout of Citrix Systems Inc.
The $4 billion secured high-yield bond portion of the deal is now being offered at a discount of about 83.6 cents on the dollar, for an all-in yield of 10%, according to a person familiar with the matter. Meanwhile, the $4.05 billion leveraged loan is being marketed at a discount of 91 to 92 cents, according to another person close to the situation.
The package also includes a euro-denominated loan equivalent in size to $500 million, and offered at 91 to 92 cents on the dollar from 92 cents earlier.
Banks have been struggling to offload risky debt backing leveraged buyouts lately as the outlook for the global economy continues to dim. This means that money managers are shying away from lower-rated credit, instead allocating cash to safer, higher-quality debt.
The cost of borrowing has spiked as well, driving up the average junk yield to 8.7%. This shift is also forcing banks to concede to steep discounts in order to drum up enough demand for debt sales.
Bank of America is leading Citrix’s leveraged loan sale, while Credit Suisse is leading the bond sale.
The leveraged loan, bond and euro-denominated loan all make up part of the larger $15 billion financing arranged by banks back in January to back Citrix’s buyout by Vista Equity Partners and Elliott Investment Management. Since then, borrowing costs have soared to levels that far exceed the maximum interest rates that the banks had guaranteed the buyout firms.
The remainder of the acquisition financing comprises $3.95 billion of second-lien debt and a $2.5 billion loan that the banks plan to hold on their own balance sheets.
Goldman Sachs Group Inc. is leading the second-lien debt portion.
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