Citadel LP drew impressive demand for its first bond offering since 2019, showing investors are eager to snap up debt from entities that rarely borrow as opposed to the frequent funders that dominate January's supply.
The US hedge fund manager garnered a US$10bn order book for its US$1bn senior unsecured dual-tranche offering on Wednesday, making it 10 times subscribed. Citadel's order book compared favourably with cover of around two to three times recorded on average by US high-grade offerings this month, according to IFR data.
Active leads Bank of America, Goldman Sachs and Morgan Stanley set IPTs for the US$500m five-year at Treasuries plus 200bp area and for the US$500m seven-year at 225bp area, later pricing them at 170bp and 190bp, respectively. The 144A/Reg S offering was rated Baa2/BBB, with proceeds earmarked to pay a dividend to Citadel's owners.
The deal drew investor interest because of the generous spreads the notes offered relative to the tightly trading investment-grade market, according to a corporate bond trader. The high-grade index was at 83bp over Treasuries on Wednesday, according to ICE BofA index data.
The offering's rarity also helped drive demand because it gave investors a chance to diversify their holdings of bonds from alternative asset managers, said the trader, noting the issuance was being benchmarked against bonds from private credit lenders such as business development companies.
"Citadel doesn't really have any bonds out there, so if you have an overexposure to Ares and the Blue Owls and other BDC-type companies, you're going to want to go and buy this new widget," he said.
Citadel's last issuance in 2019 was a US$500m seven-year senior bond that priced at Treasuries plus 325bp.