Ken Griffin’s Citadel Securities borrows $600mn as trading revenues surge

Citadel Securities borrowed $600mn on Thursday to bolster its stability sheet and buying and selling enterprise, capitalising on robust demand from lenders after risky markets helped one of many largest US fairness buying and selling homes make a banner begin to 2022.

The corporate, which is majority owned by billionaire Ken Griffin, kinds a essential a part of the plumbing of US monetary markets. It was thrown into the highlight final 12 months as thousands and thousands of buyers piled into inventory and possibility markets for the primary time.

The corporate informed lenders, which embody credit score funds, that it deliberate to make use of the $600mn partially for extra buying and selling capital. Citadel has sought to increase into markets exterior the US and construct its enterprise with institutional merchants in fastened revenue.

Paperwork circulated to lenders underscored Citadel Securities’ dominance in US monetary markets. The corporate executes greater than a fifth of equities buying and selling quantity within the US and handles extra retail inventory trades than every other market maker.

Web buying and selling revenues surged 38 per cent within the second quarter from a 12 months earlier to $1.9bn as monetary markets whipsawed, in line with individuals who noticed the outcomes and skim them to the Monetary Instances.

The excessive volatility — which got here because the S&P 500 fell right into a bear market — benefited many gamers on Wall Avenue, and buying and selling revenues at Goldman Sachs, Morgan Stanley and JPMorgan Chase all rose significantly. Citadel’s earnings earlier than curiosity, taxes, depreciation and amortisation rose 53 per cent from the 12 months previous to $1.1bn within the quarter.

For the primary half of the 12 months, web buying and selling revenues rose 23 per cent from a 12 months earlier to $4.2bn, and ebitda climbed 30 per cent to $2.6bn.

The corporate earlier this 12 months was valued at $22bn when Griffin offered a $1.2bn stake within the enterprise to enterprise capital teams Sequoia and Paradigm.

Its new backers are eager for Citadel to increase into cryptocurrency buying and selling. The market-making enterprise has been tapping credit score markets for money because it has grown, and the brand new borrowing will swell the dimensions of an current mortgage to greater than $3.5bn.

The mortgage matures in February 2028 and was issued with an rate of interest 3 proportion factors above Sofr, the brand new floating rate of interest that has been extensively adopted to switch Libor. The big urge for food to lend to Citadel allowed the Goldman Sachs bankers advertising and marketing the deal to tighten the phrases — it had initially supplied the mortgage with an rate of interest a quarter-point larger — and improve its dimension by $200mn.

Analysts at credit standing company Moody’s mentioned Citadel Securities had a “robust capital base, worthwhile observe file in periods of various market volatility, and strong danger administration capabilities”.