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

Citadel Securities on Thursday borrowed $600 million to bolster its balance sheet and trading operations, benefiting from strong lender demand after volatile markets helped one of the largest US equities trading houses get off to a flying start in 2022.

The company, majority-owned by billionaire Ken Griffin, is a vital part of US financial markets. It came under 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 debt funds, that it plans to use part of the $600 million for additional trading capital. Citadel has sought to expand into markets outside of the US and grow its business with institutional traders in the fixed income space.

Documents distributed to lenders underscored Citadel Securities’ dominance of US financial markets. The company executes more than one-fifth of the stock trading volume in the US and handles more single stock trades than any other market maker.

Net trading income rose 38 percent year over year to $1.9 billion in the second quarter as financial markets faltered, according to people who viewed the results and read them to the Financial Times.

The high volatility — which occurred as the S&P 500 fell into a bear market — benefited many Wall Street players, and trading earnings at Goldman Sachs, Morgan Stanley, and JPMorgan Chase all rose significantly. Citadel earnings before interest, taxes, depreciation and amortization rose 53 percent year over year to $1.1 billion in the quarter.

For the first half of the year, net trading income increased 23 percent year-on-year to $4.2 billion and ebitda increased 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 company to venture capital groups Sequoia and Paradigm.

Its new supporters are keen for Citadel to expand into cryptocurrency trading. The market-making business has grown to open up the credit markets to cash, and the new borrowing will take 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 floating rate widely adopted to replace Libor. The huge appetite to lend to Citadel allowed the bankers at Goldman Sachs, who marketed the deal, to tighten the terms – they had originally offered the loan at a quarter-point higher interest rate – and increase its size by $200 million .

Analysts at ratings agency Moody’s said Citadel Securities has a “strong capital base, a profitable track record through periods of varied market volatility, and solid risk management capabilities.”

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