From this financial times article that is behind a pay wall: https://www.ft.com/content/4235d823-a95e-42fb-886d-7f9f9824d304
"ComboCo’s buyers fielded a barrage of questions on its growth, the competitive pressures coming from Microsoft and Amazon, and how outsourcing engineers, reducing sales and marketing staff and culling products would translate into profits."
Which products might be on the way to being culled?
Cost of debt to Citrix is not 9.5%. That is the yield to the investors who purchase the debt from the original underwriters (e.g. BofA, Goldman, et al) in the secondary markets. The real cost to service the debt to Citrix is around 6.5%. The differential with the 9.5% is that investors are purchasing the debt at a discount (e.g. instead of paying $1,000 for a $1,000 par value of debt, they are paying $950 thereby getting a 5% discount). Accordingly the true return to the investor (i.e. yield) increases to 9.5% as they purchased the debt at a discount. Nevertheless, at a 6.5% cost of debt to Citrix, that is still $1 billion per year in interest cost alone. Citrix’s operating cash flow in 2021 was $672 million. As a result, it is really scary when you think how much costs need to be slashed to just cover the interest on the debt. That is even without considering costs to run the business like paying for your and my salary. Scary times ahead.
Wow. That's all I can say. There's so much volatility and risk being priced into this debt, and in current economic conditions is going to definitely limit the number of buyers with the appetite to take it on. Remember, those who are taking on the prospect of almost 10% returns are assuming that the "ComboCo" will perform at LEAST at current levels (albeit with significant cost reductions through RIF/attrition and operational cost slashing across every department), which is also therefore assuming that they can compete handily, particularly with Microsoft, and that captive customers will actually pay what are likely to be significant price uplifts.
It’s not done until it’s done. And then, with all of the increased debt load and swooning demand for Citrix Daas and ADC, Kraus will be on a tirade to reduce burn while answering the PE weekly reviews. And those new SVPs, if you think ELT reviews were bad, - get ready for proctology exams of your lifetimes, every day. Won’t be a fun place.
Run before more hatches are battened down in tech.
Hoooooly sh-t. They really are trying to get us to quit so they don’t have to pay severance.
What a dumpster fire. They can keep my severance, I’m getting this albatross off my back. Buh-bye
Wow. That article was crazy.
“They don’t have cash on hand and cash in the business to pay for severance and other wind-down cash expenses,” said one investor on the call. “It was lousy.”
Another reminder that people need to have their resumes ready
I think Vista may have blown this one. They would have been better off keeping TIBCO intact and not bothering with Citrix. They now have to destroy both companies to get out of this in one piece. Brilliant!
Thank you for posting. 9.5% interest on some of the loans is insane. If the business doesn't grow they'll have to cut everything to the bone.
"To entice some investors, the banks have offered mouth-watering discounts. The secured bond, which was initially expected to yield between 8.5 per cent and 9 per cent, could now be priced with a yield as high as 9.5 per cent, one person added on Wednesday."