Oak Hill, Carlyle Found Way to Dodge Losses On Citrix Preferreds

Major money managers bet on a risky kind of security to help finance the buyout of Citrix Systems Inc. earlier this year, but they have a little-known way to limit any damage: They can take the proceeds that Citrix gets from selling one of its businesses.

Investors including Oak Hill Advisors, Carlyle Group, and KKR & Co., agreed to buy $2.5 billion of preferred equity, securities that are a hybrid of stocks and bonds, to help fund Citrix’s buyout. As part of the deal, they struck an unusual agreement with the private equity firms purchasing Citrix, ...