(Bloomberg) — A group of banks led by Bank of America Corp. and Credit Suisse Group AG has finally released more than half of its $15 billion debt package to support the buyout of Citrix Systems Inc. redeemed at high discounts.
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The deal’s $4 billion secured high-yield bonds, priced at a discount of 83.56 cents to the dollar, for an all-in return of 10%, according to a person familiar with the matter. Past price talks called for a much lower return in the 8% high range. Meanwhile, the $4.05 billion leveraged loan was sold at a discount of 91 cents, according to another person close to the situation.
The package also includes a $500 million euro-denominated loan, which is also priced at 91 cents on the dollar.
Banks have struggled to transfer risky leveraged buyout debt financing to institutional investors as the outlook for the global economy continues to deteriorate. This means money managers shy away from lower-rated credit and instead allocate cash to safer, higher-quality debt.
The cost of borrowing has also risen, pushing the average clutter return to 8.7%. That level is much higher than the maximum interest rates that banks had guaranteed when they underwritten the debt obligations that supported the January buyout by Vista Equity Partners and Elliott Investment Management, eventually forcing them to offer hefty discounts to drive demand. .
Bank of America leads the sale of Citrix leveraged loans, while Credit Suisse leads the sale of bonds.
The remainder of the acquisition financing includes $3.95 billion in second lien and a $2.5 billion loan that the banks plan to keep on their own balance sheets. Goldman Sachs Group Inc. leads the second lien section.
(Updates with final prices.)
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