Wall Street Banks Set to Lose More Than $1.3 Billion on Citrix Buyout Debt

(Bloomberg) — Wall Street banks are poised to realize at least $1.3 billion in losses on the sale of ultra-risky debt tied to the leveraged buyout of Citrix Systems Inc.

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A group of banks including Goldman Sachs Group Inc., Bank of America Corp. and Credit Suisse Group AG stands to lose at least $700 million as they work to lure investors with steep discounts on another portion of the $15 billion debt package, according to Bloomberg calculations and market participants familiar with the deal. That sum would heap on top of more than $600 million in losses realized by underwriters last year.

This time, the potential for losses comes as the banks try to lure investors to buy $3.8 billion of the second-lien notes at a discounted price of 78 cents. The deal, launched on Monday, is currently in syndication.

Read: Goldman Dangles 14% Yield on Roughly $4 Billion of Citrix Debt

The estimated losses could ultimately be conservative, and the final losses depend on how much flexibility the banks received in the original underwriting commitments and the fees they were initially expected to earn on the deal.

It’s been a challenge for banks to find institutional buyers for the debt used to fund the buyout of Citrix, a cloud-computing company, by private equity firms Vista Equity Partners and Elliott Investment Management. Investor appetite waned for risky debt as major central banks sent borrowing costs soaring, forcing banks to offload at steep discounts.

Representatives for Goldman Sachs, Bank of America and Credit Suisse declined to comment. Spokespeople for Citrix, Vista and Elliot didn’t respond to a request for comment.