Citadel Securities borrowed $600 million on Thursday to shore up its balance sheet and trading business, taking advantage of strong demand from lenders after volatile markets helped one of the largest U.S. stock trading firms start the 2022.
The company, which is majority owned by billionaire Ken Griffin, is a fundamental part of the plumbing of the US financial markets. It came into the spotlight last year when millions of investors 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 in part for additional business capital. Citadel has sought to expand into markets outside the US and build its business with institutional fixed income traders.
Documents distributed to lenders highlighted Citadel Securities’ dominance of US financial markets. The company executes more than one-fifth of US equity trading volume and handles more retail securities trades than any other market maker.
Net trading income rose 38 percent in the second quarter from a year earlier to $1.9 billion as financial markets rallied, according to people who saw the results and read them in the Financial Times.
The high volatility, which came as the S&P 500 fell into a bear market, benefited many Wall Street players, with trading income at Goldman Sachs, Morgan Stanley and JPMorgan Chase rising sharply. Citadel’s earnings before interest, taxes, depreciation and amortization rose 53% from a year earlier to $1.1 billion in the quarter.
In the first half of the year, net trading income rose 23% year-over-year to $4.2 billion, and ebitda rose 30% to $2.6 billion.
The company earlier this year was valued at $22 billion when Griffin sold a $1.2 billion stake in the business to venture capital groups Sequoia and Paradigm.
Its new backers want Citadel to expand into cryptocurrency trading. The market-making business has been tapping the credit markets for cash as it has grown, and the new loan 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 variable interest rate that has been widely adopted to replace Libor. Citadel’s appetite for loans allowed Goldman Sachs bankers to market the deal to tighten the terms — it had initially offered the loan at a quarter-point higher interest rate — and increase its size by $200 million of dollars
Analysts at credit rating agency Moody’s said Citadel Securities had a “strong capital base, a profitable track record during periods of variable market volatility and strong risk management capabilities.”