A group of more than 30 of Wall Street's biggest banks were finally able to price a long-awaited US$4bn high-yield bond offering from Citrix late on Tuesday to fund its US$16.5bn leveraged buyout amid challenging market conditions before September’s FOMC meeting.
The 6.5-year non-call three senior secured note came with a 6.5% coupon pricing at an 83.561 discount to yield 10%, outside of price talk that came in on Monday at 9.5%-9.75% with an original issue discount range of 85.695 to 84.620.
Citrix's US$4bn bond is the largest high-yield issue so far this year, surpassing Carvana's US$3.275bn bond issued in April.
The bond backing Vista Equity Partners and Elliot Management's buyout of the cloud computing company was launched on a September 13 investor call. Credit Suisse is the lead left underwriter. Among 33 other bookrunners were Bank of America, Goldman Sachs, Barclays, Citigroup, Deutsche Bank, KKR, Mizuho, Morgan Stanley, RBC and Apollo.
Momentum from investors on Citrix's bond never picked up significantly, which forced underwriters to take a hit on the deal pricing at a discount and an expensive 10% yield.
"That's the only way they could get the US$4bn," said Adam Coons, a high-yield portfolio manager at Winthrop Capital Management, about Citrix's pricing. As of last Thursday, the offering was about 75% subscribed, Coons said, yet did reach the full US$4bn size on Tuesday.
Demand for Citrix's bond was "making progress," a banker working on the deal told IFR on Monday, while admitting that the current market is more challenging than in the recent past.
“We wish we had a market that was like pre-Jackson Hole but we don’t have that market today,” the banker said on Monday, referring to the Federal Reserve's annual conference in Wyoming held in August. “We will all take a little pain on the price."
Once the buyout is finalized Ft. Lauderdale, Florida-based Citrix will be combined with Vista portfolio company Tibco Software.
S&P assigned a B rating to the senior notes on Monday.
The buyout financing also includes a US$4.05bn term loan and a US$500m-equivalent euro-denominated term loan B by arrangers Bank of America, Credit Suisse and Goldman Sachs.