Mon 09/19/2022 15:08 PM
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UPDATE 1: 3:08 p.m. ET 9/19/2022:

Relevant Item:
Supplement No. 1 to Preliminary Offering Circular

There are numerous changes to the terms of the new secured notes due 2029 issued in connection with the Citrix buyout, as set forth in a supplement to the preliminary offering circular issued today.

As described by sources, the changes are summarized as follows:

An updated analysis of the notes, incorporating the supplement to the offering memorandum, is now available HERE.

An updated flexibility table for the new notes is presented below:

The following table, updated for the supplement, summarizes the presence of certain material holder protections and material aggressive terms included in the new notes:


Original Story 10:18 a.m. UTC on Sep. 15, 2022

Primary: New 1L Notes to Fund Citrix Buyout Provide Massive Capacities for Debt and Unsub Transfers; Aggressive Terms Include RP Buildup Basket Based on 100% EBITDA

Relevant Item:
2029 1L Secured Notes Primary Covenants Analysis

Picard Midco Inc., an entity formed by Vista Equity Partners, is issuing $4 billion of secured notes due 2029 (the “Notes”) in connection with the acquisition of Citrix Inc. by Vista and Evergreen Coast Capital (an affiliate of Elliott Investment Management). After the acquisition, Citrix will be merged with Tibco Software Inc., a Vista portfolio company.

The Notes are expected to price on Monday, Sept. 19.

Proceeds from the Notes, together with proceeds from new term loan borrowings, new second lien debt, preferred stock offering and sponsor equity contributions, will be used to fund the purchase price for the transaction and to repay existing Citrix and Tibco debt.

Additional Reorg analysis of this transaction can be found here.

Citrix has $750 million of 1.25% unsecured notes due 2026, $750 million of 4.5% unsecured notes due 2027 and $750 million of 3.3% unsecured notes due 2030. Citrix plans to redeem its outstanding 2026 and 2030 notes with a make whole premium, and it has made a change-of-control offer to repurchase its 2027 notes at 101%; in each case, the repurchase is conditioned on the consummation of the merger. Any Citrix 2027 notes that remain outstanding post-merger will be secured pari with the Notes and the combined company’s other first lien debt.

The pro forma debt structure of the combined business as of June 30 is summarized below:

A comprehensive report on the Notes is available HERE.
Notable Issues

Significant issues under the Notes include the following:

  • Debt capacity, value leakage: As summarized in the flexibility scale below, the Notes provide enormous capacity for additional pari secured debt or structurally senior debt, and similarly significant flexibility for value leakage, especially through transfers to unrestricted subsidiaries. Note that the estimated debt and transfer capacities include amounts using restricted payment capacity under “Available RP Capacity Amount” baskets allowing 200% of all RP capacity plus 200% of capacity under the general ”Permitted Investments” basket capacity to be used for secured debt, structurally senior debt or investments. A leverage-based investments basket may be initially accessible, with about 0.5x headroom.

  • Guarantor coverage: Pro forma as of May 31, 2022, nonguarantor subsidiaries accounted for approximately 47% of consolidated revenue and 52% of consolidated assets.

  • Carve-out from future guarantor requirement: Subsidiaries are permitted to guarantee other debt without guaranteeing the Notes as long as such debt does not exceed the greater of $3.0375 billion and 150% of EBITDA.

  • Buildup basket based on 100% of EBITDA: The restricted payments buildup basket is based in part on the greater of 50% of consolidated net income and 100% of EBITDA, in each case from the quarter in which the merger occurs. Usually, when EBITDA is the relevant metric in this basket, capacity is based on 100% of EBITDA less 120% of interest expense.

  • “Ratio not worse” leverage-based investment and RP baskets: The leverage-based investments basket permits unlimited investments, as long as the Issuer can meet a 7.5x net total leverage ratio or a 1.75x fixed charge coverage ratio or if either ratio would not be made worse by the transaction. The leverage-based RP basket similarly includes a ratio-not-worse alternative. By allowing investments whenever pro forma net total leverage is not made worse, the Notes allow the issuer to transfer 100% of the equity of any subsidiary that generates negative EBITDA at any time.

  • RP capacity may be increased by merger equity contribution: As is typical, the restricted payments buildup basket is increased by amounts contributed to equity after the issue date. The merger will be consummated after the issue date and will include a $6.5 billion equity contribution. Arguably, some or all of that amount will increase capacity under the buildup basket (and 200% of that amount could be reallocated for secured debt or investments under the applicable “Available RP Capacity Amount” baskets).

  • RP capacity based on excluded asset sale proceeds: Amounts excluded from the asset sale covenant because of a leverage-based step-down provision as well as amounts excluded because of the minimum threshold for an “Excess Proceeds” offer will increase restricted payment capacity under the Notes.

  • UnSub actions not “indirect” restricted payments: The Notes expressly allow unrestricted subsidiaries to use value transferred using “Permitted Investment” capacity to purchase debt or equity or transfer value to the issuer’s equityholders without violating the restricted payments covenant.

  • Asset cushion exception: The Notes expressly provide that a disposition of assets is not a disposition of “substantially all” assets under the indenture if the fair market value of the remaining assets exceeds the aggregate principal amount of all outstanding Notes and other debt ranking equally or senior to the Notes with respect to such assets. This provision impacts the merger and change-of-control covenants, as discussed by Americas Covenants HERE.

  • Diluted asset sale covenant: The asset sale covenant includes numerous features that dilute the protection provided to noteholders, including exclusion of all asset sales when in pro forma compliance with a 6.95x net total debt ratio, a leverage-based step-down of the amount of proceeds subject to the repayment or reinvestment requirements, individual and annual aggregate carve-outs, and an exclusion from excess proceeds of amounts up to the greater of $1.0125 billion and 50% of EBITDA.

  • Uncapped cost savings adjustment: Covenant EBITDA can be increased using an uncapped adjustment for cost savings or synergies relating to various transactions or initiatives if projected to result from actions taken within 36 months of the determination date. While this addback is common, it is often capped as a percentage of EBITDA, usually 25% or less, and the look-forward period is more typically 24 months from the relevant transaction.

  • 10% at 103 redemption: Up to 10% of the Notes can be redeemed at 103% in any 12-month period until a to-be-determined date in 2025.

Flexibility Under the Notes

The issuer’s flexibility under the Notes is summarized in the table below:

The following table summarizes the presence of certain material holder protections and material aggressive terms included in the Notes:

If you would like to request an Americas Covenants analysis of any other new bond offering, please submit the offering memorandum to us at

--Mitch Oates
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