Apollo-Led Group Looks to Take $4 Billion of Citrix Buyout Debt
Apollo-Led Group Looks to Take $4 Billion of Citrix Buyout Debt
(Bloomberg) -- Apollo Global Management Inc. has approached the banks behind the buyout financing for Citrix Systems Inc. with an offer to purchase as much as $4 billion of the debt together with other private credit funds.
Discussions with the banks are still preliminary and have so far focused on the secured portion of the $15 billion commitment, according to a person with knowledge of the matter. Ares Management Corp. and Blackstone Inc. are among the other private credit firms that have been contacted by Apollo, said the person, who asked not to be named because the talks are private.
The conversations among some of the world’s largest credit investors come at a time when geopolitical tumult, accelerating inflation and the prospect of further Federal Reserve interest rate hikes is making it more difficult for banks to sell junk-rated debt in broad syndications. A sharp repricing of risk assets in the wake of Russia’s invasion of Ukraine forced some banks to take losses on debt sales for pending acquisitions last month, Bloomberg reported.
Private credit funds, on the other hand, are flush with cash after a record year for fundraising in 2021. The expanding $1.12 trillion market has also been more resilient throughout the recent bout of volatility, allowing direct lenders to provide big loans to fund buyouts, including for software company Anaplan Inc. just last month.
The group of banks that underwrote the Citrix take-private transaction, led by Bank of America Corp., Credit Suisse Group AG and Goldman Sachs Group Inc., has opted to wait until closer to the takeover’s expected closing in June before making a decision on how to distribute the financing, the person said.
Representatives for Apollo, Ares and Blackstone declined to comment, as did Bank of America, Credit Suisse and Goldman Sachs.
Vista Equity Partners and Elliott Investment Management agreed to take private workspace software maker Citrix and combine it with Vista portfolio company Tibco Software Inc. at the end of January, before the war in Ukraine sent credit spreads wider and cooled investor appetite for risky assets broadly.
A representative for Vista declined to comment, while Elliott didn’t respond to requests seeking comment.
By placing a chunk of the debt with credit funds in a private deal, the banks could reduce the amount that needs to be broadly syndicated and lock in pricing on a large portion of the financing, avoiding a hit to their bottom line if conditions in credit markets worsen.
The funds have offered to buy a portion of the Citrix debt at levels that are close to the maximum total borrowing costs banks guaranteed to Vista and Elliott when they agreed to fund the transaction. These rates range from around 6% for a $7.05 billion term loan to around 9% for $3.95 billion of unsecured bonds, according to the person. The debt package also includes the $4 billion of secured bonds.
Selling the debt above those levels could force the banks to eat into the fees they earn for underwriting the deal or, even worse, result in outright losses. The average yield on bonds with triple-C ratings, the lowest rung of speculative-grade debt, reached 9.69% on Tuesday, near the highest since November 2020, according to data compiled by Bloomberg.
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