Ken Griffin’s Citadel Securities lends $600 million as trading revenue soars

Ken Griffin’s Citadel Securities lends $600 million as trading revenue soars

Citadel Securities on Thursday borrowed $600 million to shore up its balance sheet and trading business, capitalizing on strong demand from lenders after choppy markets helped one of the biggest U.S. equities trading houses make a banner start to 2022.

A company that is majority owned by billionaires Ken Griffin, forms a critical part of the plumbing in the US financial markets. It was thrust into the spotlight last year when millions of investors piled into the stock and options markets for the first time.

The company told lenders, including credit facilities, that it plans to use $600 million in part for additional trading capital. Citadel has sought to expand into markets outside the US and build its business with institutional fixed income traders.

Documents distributed to lenders highlight Citadel Securities’ dominance of US financial markets. The company handles more than a fifth of US equity trading volume and handles more retail equity trading than any other manufacturer.

Net trading income rose 38 percent in the second quarter from a year earlier to $1.9 billion as financial markets tumbled, according to people who saw the results and read them for the Financial Times.

High volatility — which occurred when the S&P 500 fell into a bear market — used by many players on Wall Street, and trading revenues at Goldman Sachs, Morgan Stanley and JPMorgan Chase rose significantly. Citadel’s earnings before interest, taxes, depreciation and amortization rose 53 percent from a year earlier to $1.1 billion in the quarter.

For the first half of the year, net trading revenue rose 23 percent year-over-year to $4.2 billion, and ebitda rose 30 percent to $2.6 billion.

The company was valued at $22 billion earlier this year when Griffin sold a $1.2 billion stake in the business venture capital groups Sequoia and Paradigm.

Its new backers want Citadel to expand into cryptocurrency trading. The market-making business has used the credit markets for cash as it has grown, and the new borrowing will increase the size of the existing loan to more than $3.5 billion.

The loan matures in February 2028 and is issued at an interest rate 3 percentage points above Sofr, the new floating interest rate widely adopted to replace Libor. Citadel’s strong appetite for lending allowed Goldman Sachs bankers pitching the deal to tighten the terms — initially offering a quarter-point higher interest rate loan — and increase its size by $200 million.

Analysts at the credit rating agency Moody’s said Citadel Securities has “a strong capital base, profitable results during periods of varying market volatility and solid risk management capabilities.”

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