Goldman Sachs Group Inc. is in discussions with investors about selling around $4 billion of subordinated debt that lenders backing the buyout of Citrix Systems Inc. have held for months, according to people with knowledge of the matter.
(Bloomberg) — Goldman Sachs Group Inc.
is in discussions with investors about selling around $4 billion of subordinated debt that lenders backing the buyout of Citrix Systems Inc. have held for months, according to people with knowledge of the matter.
The timing of the transaction is dependent on the release of new audited Citrix financials, which aren’t expected until the new year, said the people, asking not to be named because they’re not authorized to speak publicly.
That puts any potential sale on track for late January or early February, the people said, adding that discussions are in the early stages and there’s no guarantee a deal gets done.
The sale would clear most of what remains of the $6.5 billion of Citrix financing initially left stuck on lender balance sheets in September after a sharp repricing of risk assets upended underwriting pledges made earlier in the year.
Goldman Sachs is looking at various options to unload the Citrix debt, including selling it to private credit shops or via the syndicated bond market, the people said.
A representative for Goldman Sachs declined to comment.
Citrix and the leveraged buyout’s sponsors, Vista Equity Partners and Elliott Investment Management, didn’t respond to requests seeking comment.
Steep Discount
Wall Street banks are still sitting on about $38 billion of buyout and acquisition debt that they haven’t been able to sell following the dramatic turn in credit conditions earlier this year, according to data compiled by Bloomberg.
That includes an estimated $12.5 billion tied to the buyout of Twitter Inc.
Citrix’s existing first-lien term loan is quoted at about 89 cents on the dollar in the secondary market, according to prices compiled by Bloomberg.
The second-lien financing would likely be sold at a discount to wherever the first-lien loan is trading because investors consider the subordinated debt to be riskier.
Banks have offloaded other portions of Citrix debt throughout December at steep discounts, Bloomberg has reported.
Apollo Global Management Inc., Franklin Templeton and Diameter Capital Partners have been among the buyers.
The subordinated tranche was retooled and structured as a second-lien bond, which offers more collateral than unsecured debt but falls behind the first-lien term loans for claims on the company’s assets in the case of a restructuring or bankruptcy.
Any sale of the second-lien bond will come under a pooling arrangement that the banks have employed to sell other portions of the Citrix hung debt, wherein an offer that one bank receives is shared with all the lenders, one of the people said.
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