Citadel’s Griffin Reaps Windfall From Company’s Bond Sale

Citadel Limited Partnership sold $500 million in investment-grade bonds earlier this month to fund a dividend to its owners, an unusual move for most hedge funds but the second time in three years Citadel has done so. Citadel, the management company of the Chicago hedge-fund giant founded by

Kenneth Griffin,

issued seven-year bonds with yields below 5%. The deal increased Citadel’s debt while directing hundreds of millions of dollars to Mr. Griffin. While he owns the vast majority of the equity in the management company, a person familiar with Citadel said dividends also will be distributed to other equity holders for their personal use.

Mr. Griffin, who started investing as a 19-year-old in his Harvard dorm room, earlier this year drew attention after buying a Manhattan penthouse for $238 million. The deal for the roughly 24,000-square-foot apartment bordering Central Park, a pied-à-terre for the 50-year-old Mr. Griffin, set a record price for a home sold in the U.S. The deal followed other record-breaking real-estate purchases the multibillionaire has made in recent years in London, Chicago and Miami Beach. A spokesman for Citadel said in a statement Mr. Griffin “spends a considerable amount of time in New York and London” given the firm’s presence in each city. In the art world, Mr. Griffin made waves in 2016 with his $500 million deal for a pair of paintings by Jackson Pollock and Willem de Kooning. Mr. Griffin also has made big-ticket donations to Harvard University and the University of Chicago and has said he plans to give at least a billion dollars to higher education over the rest of his lifetime to keep the U.S. competitive. Investors showed appetite for Citadel’s new bonds. The debt was sold at a yield that was 3.25 percentage points above the comparable U.S. Treasury note—less than the 3.33 spread on the company’s first bonds issued in 2017, according to LCD, a unit of S&P Global Market Intelligence. A lower spread signals greater confidence among investors that a bond will be fully repaid at maturity. The 2017 bonds also raised $500 million for the purpose of paying dividends. The Citadel spokesman said in a statement, “The capital markets have recognized the strength of our hedge-fund management business by participating in our most recent debt issuance.” After standing on the brink of collapse in 2008 during the financial crisis, Citadel reached its high-water mark, or the point at which its investors were made whole, in 2012. It now manages about $32 billion and amplifies bets its teams of traders make with the heavy use of borrowed money. The firm has a reputation for rapid change at its business units and within its executive levels. Citadel’s flagship multistrategy hedge fund, Wellington, was up 14.3% this year through August, said a person familiar with the firm. Hedge funds, on average, gained 7.8% over the same period, according to research firm HFR. Write to Juliet Chung at juliet.chung@wsj.com and Sam Goldfarb at sam.goldfarb@wsj.com

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