Banks pull off biggest junk bond issue since banking crisis

A GOLDMAN Sachs Group-led group of banks successfully completed on Tuesday (Apr 4) the biggest issuance of a junk bond since last month’s banking crisis began, indicating that investor appetite for this risky debt is starting to recover.

The 33-bank group sold roughly US$3.8 billion of new bonds issued by software maker Citrix Systems for 79 US cents on the dollar, in line with what they asked for, according to people familiar with the matter.

The bonds carry a 9 per cent coupon, a 14 per cent yield and call protection through September 2025.

The new Citrix bonds will refinance most of a US$3.95 billion unsecured bridge loan that helped private equity firms Vista Equity Partners and Evergreen Coast Capital acquire the cloud software maker for US$16.5 billion in September 2022. The loan would have matured in September 2023.

Goldman Sachs and Vista declined to comment. Citrix and Evergreen did not immediately respond to requests for comment.

The market for junk-rated debt had largely shut down following the failures last month of US regional banks Silicon Valley Bank and Signature Bank and the forced sale of Credit Suisse Group to Swiss peer UBS Group.

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Issuance of junk bonds in the US dropped from US$13.9 billion in February to US$4.45 billion in March, according to Informa, as the market turmoil soured the risk appetite of investors.

The sale marks the last chunk of Citrix buyout debt on banks’ books, according to one of the sources. A steep rise in interest rates had made it difficult for banks to sell that debt.

Banks are also expected to market to investors a portion of the US$5.4 billion in debt which last year financed auto parts supplier Tenneco’s buyout by Apollo Global Management. REUTERS