A group of banks led by Goldman Sachs Group Inc. is set to hold an investor call on Monday to sell $3.8 billion in Citrix Systems bonds in a move signaling a positive turn for the junk debt market after recent banking crises. This sale marks the largest sale of junk debt since U.S. regional banks Silicon Valley Bank and Signature Bank filed for bankruptcy last month, along with Credit Suisse Group AG being forced to sell to UBS Group AG.
The U.S. junk bond issuance saw a significant drop from $13.9 billion in February to $4.45 billion in March, as the market was hit by turmoil that dampened risk appetite. Tim Leary, a senior portfolio manager at BlueBay Asset Management, noted that the leveraged financial market has been notably quiet this year.
The new Citrix bonds will be used to refinance most of a $3.95 billion unsecured bridge loan that was utilized to facilitate the acquisition of the cloud software maker by private equity firms Vista Equity and Evergreen Coast Capital for $16.5 billion in September 2022. This loan was originally scheduled to mature in September 2023.
The 6.5-year bonds feature a 9% coupon rate and are non-redeemable until September 2025. In addition to Goldman Sachs, the organizing group of 33 banks involved in the sale includes Bank of America, Credit Suisse, Barclays, Citibank, and Deutsche Bank. Citrix, Vista, Evergreen, and Goldman Sachs have all declined to comment on the matter.
Last year, banks sold $8.55 billion of Citrix buyout debt to investors, taking losses amounting to around $600 million as investors demanded significant discounts due to rising interest rates. Since then, there have been multiple block transactions involving the remaining debt. Furthermore, along with the Citrix bonds, banks are expected to market to investors a portion of the $5.4 billion debt that financed Apollo Global Management’s purchase of auto parts supplier Tenneco last year.
Overall, the upcoming sale of Citrix Systems bonds signals a positive turn in the junk debt market following recent banking crises, reflecting a gradual recovery and potential stabilization in the market.
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