Tue 09/13/2022 16:31 PM
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With many market participants expecting banks to take steep losses on the Citrix debt package backing its LBO by affiliates of Elliott Investment Management and Vista Equity Partners, terms and mechanics in the offering memorandum for the proposed $4 billion of senior secured notes due 2029 are some of the most aggressive that we’ve seen over the past few years.

Additional first lien and structurally senior debt utilizing 200% of all permitted restricted payment capacity and 200% of capacity under a general-purpose investments basket based on 100% of EBITDA is aggressive. Additional transfer capacity, including transfers to unrestricted subsidiaries, using the same (including 200% of the general-purpose investments basket itself!) is really aggressive.

But what takes the cake?

Proceeds from the notes will be deposited into an escrow account on the issue date and will be released on the “Completion Date” to fund the LBO. The sponsors’ $6.5 billion equity contribution will also be made on the Completion Date.

Nevertheless, builder basket capacity for dividends and transfers (which capacity can be converted into 200% debt and even more transfer capacity) and secured contribution debt capacity is based on cash contributions received after the issue date, not the Completion Date.

This temporal distinction will instantly result in Citrix having $6.5 billion of dividend capacity and could result in it instantly having $13 billion of additional first lien debt or transfer capacity, too.

Does Citrix have any negative EBITDA-generating but still highly valuable businesses? If it does, the notes will immediately allow it to dividend those businesses to the sponsors or transfer them to unrestricted subsidiaries as the notes include ratio-based dividend and investment baskets that can be accessed as long as pro forma leverage is not worse.

As the cherry on top, the OM provides that:
“As of and for the twelve months ended May 31, 2022, on a pro forma basis after giving effect to the Transactions, our nonguarantor subsidiaries generated approximately 47% of our consolidated revenues, held approximately 52% of our consolidated assets.”

Americas Covenants by Reorg will be publishing a full analysis of Citrix’s notes tomorrow, Wednesday, Sept. 14.
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