(Bloomberg) --A group of banks led by Goldman Sachs Group Inc. launched a $3.84 billion deal to offload the riskiest chunk of financing from last year's Citrix Systems Inc. buyout, according to people with knowledge of the matter.
After being saddled with the debt for months, the banks are offering the 6.5-year second-lien notes at a coupon of 9%, said the people, who asked not to be named discussing a private transaction. The bonds are initially being marketed at a heavily discounted price of 78 cents, bringing the all-in yield to roughly 14%, said the people. Goldman Sachs and others previously floated a yield of 13%-14% in February.
Read More: Goldman-Led Group Prepares to Offload $4 Billion of Citrix Debt
Representatives for Goldman Sachs, Citrix and buyout sponsors Vista Equity Partners and Elliott Investment Management didn't respond to requests for comment on the initial pricing.
This last major portion of the Citrix financing is considered the riskiest because investors won't be given first priority should the company ever go bankrupt. It's also the first subordinated debt offering to come to the high-yield market this year, according to data compiled by Bloomberg.
The current bond sale means banks are within striking distance of unhooking themselves from the biggest piece of remaining debt supporting Vista and Elliott's acquisition of Citrix. It would also put a bow on the deal that was expected to net banks hefty fees but instead
Lenders had originally provided $15 billion of debt financing for the buyout, but only managed to sell $8.55 billion of bonds and loans at
Banks have been struggling to sell debt languishing in their books from high-profile deals such as the take-private of Twitter Inc. and the combination of NielsenIQ and GfK. Debt from Apollo Global Management Inc.'s
Those deals are considered harder to sell, with investors avoiding risk as the Federal Reserve's persistent interest-rate hikes stoke recession fears. Banks are also loath to offload the debt at fire sale prices and realize what, for now, are only paper losses.
Before the collapse of Silicon Valley Bank and the sudden takeover of Credit Suisse Group AG dampened sentiment, bankers seized on short rallies in the market to clear chunks of the hung debt in spurts. Improving market sentiment in the coming weeks following the purchase of Silicon Valley Bank could potentially pave the way for more debt deals to come to the market.
(Updates throughout with initial price talk and comment lines for involved parties.)
--With assistance from Allan Lopez and Jeannine Amodeo.
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