Cloud Software Group Inc., the parent company of Citrix Systems Inc., recently sought funding from investors for the third time in six months to pay off higher-cost obligations. This move is part of a trend where many riskier borrowers are taking advantage of favorable credit conditions to raise funds.
The private equity firm initially aimed to raise $1 billion but increased this target to $1.8 billion by selling eight-year bonds. The notes were priced at par to yield 8.25%. Cloud Software plans to use a portion of the proceeds to prepay $415 million in credit facilities, with the remainder going towards general corporate purposes, including potentially redeeming preferred stock later in the year.
The firm, along with its owners Elliott Investment Management and Vista Equity Partners, teamed up with UBS to lead the debt sale. However, none of the parties involved responded to requests for comment on the matter.
The notes come with a three-year no-call provision and various special features, including the option to redeem the debt if the company goes public during the specified period. Cloud Software’s decision to issue bonds reflects a growing trend among borrowers to tap into primary markets amidst strong investor demand for corporate debt, partly fueled by dovish remarks from the Federal Reserve and recent economic data showing weakness.
High-yield bond spreads remain below 300 basis points, and yields are below 8%, indicating favorable pricing for borrowers. This week witnessed the largest sales of junk-rated notes since November 2021, signifying the robust appetite for riskier debt.
Prior to the recent bond sale, Cloud Software had previously raised funds in the leveraged loan market twice within the last six months, with the most recent deal being a $1 billion loan in March. The company’s improved perception in the market is evident as it continues to attract investors and lenders for its financing needs.
Cloud Software’s successful bond sale contrasts with its past struggles, such as the $15 billion financing package it received for its 2022 acquisition, which led to banks holding unsold debt on their balance sheets due to adverse market conditions. Ultimately, the debt had to be sold at significant discounts to attract buyers.
In summary, Cloud Software’s latest fundraising efforts reflect a positive turn in market sentiment towards the company, showcasing its ability to secure funding amidst challenging economic conditions. This growing trend of riskier borrowers taking advantage of favorable credit conditions is likely to continue as investor demand for corporate debt remains strong.
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https://finance.yahoo.com/news/citrix-parent-taps-bond-market-134116674.html
