Citadel Securities borrowed $600 million on Thursday to bolster its balance sheet and trading business, capitalizing on strong demand from lenders after market volatility helped one of America’s largest equity trading firms get started in 2022.
The company, majority-owned by billionaire Ken Griffin, is a vital part of the plumbing of US financial markets. He was thrust into the limelight last year as millions of investors crowded into the stock and options markets for the first time.
The company told lenders, which include loan funds, that it plans to use part of the $600 million for additional business capital. Citadel has sought to expand into markets outside of the United States and to expand its business with institutional fixed income traders.
Documents distributed to lenders underscored Citadel Securities’ dominance in US financial markets. The firm executes more than one-fifth of the equity trading volume in the United States and handles more retail equity trading than any other market maker.
Net trading revenue jumped 38% in the second quarter from a year earlier to $1.9 billion as financial markets slumped, according to people who saw the results and read them at Financial Times.
The high volatility — which came as the S&P 500 fell into a bear market — benefited many Wall Street players, and trading revenue from Goldman Sachs, Morgan Stanley and JPMorgan Chase all rose significantly. Citadel’s earnings before interest, taxes, depreciation and amortization rose 53% year over year to $1.1 billion in the quarter.
In the first half of the year, net trading revenue increased 23% year-on-year to $4.2 billion, and Ebitda soared 30% to $2.6 billion. dollars.
Earlier this year, the company was valued at $22 billion when Griffin sold a $1.2 billion stake in the company to venture capital groups Sequoia and Paradigm.
Its new backers want Citadel to expand into cryptocurrency trading. The market-making business tapped credit markets for liquidity as it grew, and the new borrowing will increase the size of an existing loan to more than $3.5 billion.
The loan matures in February 2028 and was issued at an interest rate 3 percentage points above Sofr, the new widely adopted variable interest rate to replace Libor. The large appetite to lend to Citadel allowed Goldman Sachs bankers marketing the deal to tighten the terms – it originally offered the loan with a quarter-point higher interest rate – and increase its size by $200 million.
Analysts at credit rating agency Moody’s said Citadel Securities had “a strong capital base, a track record of profitability during periods of varying market volatility, and strong risk management capabilities.”
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