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Ken Griffin’s Citadel Securities borrows $600 million as trading revenue rises

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Citadel Securities on Thursday borrowed $600mn to bolster its balance sheet and trading business, helping one of the largest US equity trading houses launch a banner by 2022 to capitalize on strong demand from lenders after volatile markets. got help.

The company, owned by billionaire Ken Griffin, is an important part of the pipeline of US financial markets. It made headlines last year as millions of Americans flocked to the stock and options markets for the first time.

The company told lenders, which include credit funds, that it planned to use the $600 million for additional trading capital. Citadel has sought to expand into new markets outside the US and build its business with fixed income institutional traders.

Documents circulated to lenders underscore Citadel Securities’ dominance in the US financial markets. The company executes more than a fifth of equity trading volume in the US and handles more retail stock trades than any other market maker.

Net trading revenue rose 38 percent to $1.9 billion in the second quarter from a year earlier, according to those reading the Financial Times and those who read the results.

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

For the first half of the year, net business revenue rose 23 percent from a year earlier 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 to venture capital firms Sequoia and Paradigm, and its new backers were eager for Citadel to expand into the cryptocurrency business. The market-making business is continually tapping credit markets for cash as it has grown, and the new lending will increase the size of existing loans to more than $3.5 billion.

The loan matures in February 2028 and was issued with an interest rate of 3 percentage points above SOFAR, the new floating interest rate that has been widely adopted to replace LIBOR. The Citadel’s great appetite for lending allowed Goldman Sachs bankers to market the deal to tighten terms—it initially offered loans with a quarter-point higher interest rate—and increased its size to $200. million increased.

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

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