# Banks close painful Citrix debt chapter with $700 million loss -source
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-09-22
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Wall Street banks face $700 million loss in Citrix buyout
Meta Description: Learn how Wall Street banks completed the sale of $8.55 billion in loans and bonds for Citrix Systems Inc at a $700 million loss. Find out more here.
URL: https://financedigest.com/banks-close-painful-citrix-debt-chapter-with-700-million-loss-sourcehtml

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By Abigail Summerville and Matt Tracy

(Reuters) – Wall Street banks completed the sale of $8.55 billion in loans and bonds backing the leveraged buyout of business software company Citrix Systems Inc by accepting a $700 million loss, a person familiar with the matter said on Wednesday.

The process emerged as a key test of banks’ ability to offload junk-rated debt from their books, a process that is necessary for them to recycle capital and comply with regulations governing their financial health.

While the syndication was completed successfully, it was done at a steep discount to the levels that the [banks underwrote the debt](https://www.financedigest.com/seven-out-of-ten-uk-adults-aged-25-44-never-seek-advice-on-dealing-with-debts-despite-depending-on-the-bank-of-mum-and-dad.html "Seven out of ten UK adults aged 25-44 never seek advice on dealing with debts despite depending on the bank of mum and dad"). It was also buoyed by one of Citrix’s acquirers, [hedge fund](https://www.financedigest.com/what-is-a-hedge-fund.html "What Is A Hedge Fund") Elliott Management, helping out by buying $1 billion in bonds, a second source said.

[Private equity](https://www.financedigest.com/procurementin-european-private-equity-investment-adding-value-to-the-boardroom.html "Procurement in European private equity investment – adding value to the boardroom.") firms, which rely on junk-rated debt to juice returns in their acquisitions of companies, have witnessed banks retrench in the wake of Citrix and other deals weighing on their balance sheet. Bankers said this was unlikely to change soon, as [rising interest rates and market volatility fueled by Russia’s war in Ukraine raised the risk](https://www.financedigest.com/stocks-rise-after-bank-sale-fuels-investor-risk-appetite.html "Stocks rise after bank sale fuels investor risk appetite") of deals they underwrite appearing mispriced just a few weeks later.

Banks led by Bank of America Corp, [Credit Suisse](https://www.financedigest.com/mitsubishi-ufj-to-postpone-at1-bond-issuance-in-credit-suisse-fallout.html "Mitsubishi UFJ to postpone AT1 bond issuance in Credit Suisse fallout") Group AG and Goldman Sachs Group Inc sold a Citrix loan to investors of about $4.55 billion with an annual interest rate of 450 basis points over their benchmark and at a discount of 91 cents on the dollar, people familiar the matter said.

They also sold a $4 billion three-year Citrix [bond for 83.6 cents on the dollar](https://www.financedigest.com/rate-fever-propels-dollar-wallops-stocks-and-bonds.html "Rate fever propels dollar, wallops stocks and bonds"), resulting in a higher than expected yield of 10%, the sources added. Reuters had [reported last week the loans were meeting strong](https://www.financedigest.com/strong-nighttime-earthquake-jolts-sleeping-mexicans-at-least-one-death-reported.html "Strong nighttime earthquake jolts sleeping Mexicans, at least one death reported") demand, while the bonds, which were subordinated in Citrix’s capital structure, were less popular.

[Bank of America and Credit](https://www.financedigest.com/explainer-what-are-credit-default-swaps-and-why-are-they-causing-trouble-for-europes-banks.html "Explainer-What are credit default swaps and why are they causing trouble for Europe’s banks?") Suisse declined to comment. Goldman Sachs and Elliott did not immediately respond to requests for comment.

More [debt syndication pain for the banks is on the way](https://www.financedigest.com/5-common-ways-people-end-up-in-debt-without-realising.html "5 Common Ways People End Up In Debt Without Realising"). A roughly $2 [billion loan backing private equity firm Apollo Global](https://www.financedigest.com/credit-suisse-54-billion-lifeline-offers-limited-respite-to-global-banks.html "Credit Suisse  billion lifeline offers limited respite to global banks") Management Inc’s purchase of telecommunication assets from Lumen Technologies is being marketed at a discount of 92 cents on the dollar, while a $1.87 billion bond for the same deal is being sold at a steep 10% yield.

(Reporting by Abigail Summerville in New York and Matt Tracy in Washington, D.C.; Editing by Josie Kao)


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