Record $4.8 Billion Private Loan Refinances Vista’s Finastra

Private credit behemoths including Blue Owl Capital and Oak Hill Advisors are providing a record $4.8 billion fully funded direct loan as part of Vista Equity Partners’ refinancing of fintech firm Finastra Group Holdings Ltd.’s debt, people with knowledge of the matter said.

(Bloomberg) — Private credit behemoths including Blue Owl Capital and Oak Hill Advisors are providing a record $4.8 billion fully funded direct loan as part of Vista Equity Partners’ refinancing of fintech firm Finastra Group Holdings Ltd.’s debt, people with knowledge of the matter said. 

The private loan is structured as a unitranche, a blend of senior and subordinated debt. The deal will be the largest such direct loan when it closes, said the people, who asked not to be named because details are private. Last year saw a $4.95 billion private financing for Zendesk Inc., but that included a $850 million delayed-draw term loan component.

The new loan highlights the growing heft of the $1.5 trillion private credit market, which is rapidly reshaping how private equity firms fund buyouts. Finastra, owned by Vista, was able to cut pricing on the deal in a sign of strong demand.

Other lenders include Ares Management Corp., HPS Investment Partners and KKR & Co., the people said. Some lenders including Sixth Street Partners that were initially involved dropped out as negotiations progressed, the people said. 

Representatives for Vista, HPS, Ares, Sixth Street, Blue Owl, Oak Hill and KKR declined to comment.  

The loan is smaller than envisioned in early discussions. Private lenders had contemplated a deal for a $5.3 billion unitranche and $500 million to $700 million of additional debt, or a $4 billion first—lien loan and a $2 billion second-lien loan that paid interest in-kind, or so-called PIK, Bloomberg previously reported.

But the company struggled to gain traction for a subordinated debt portion. Once Vista pledged $1 billion of preferred equity that would let Finastra lower its debt burden of nearly $6 billion, the private loan came together quickly, the people said.

Finastra was able to cut pricing on the loan to 725 basis points above a key benchmark rate with a discounted price of 98 cents on the dollar, according to the people. That’s down from earlier price discussions of 750 basis points above the benchmark an a price of 97.5 cents.

The new loan refinances debt Finastra raised in the US and European leveraged loan markets for its take-private by Vista. The older loans mature in March 2024.

Vista began discussing a refinancing deal with existing lenders before opting to tap the private credit markets, the people said. The private deal means that one of the biggest borrowers is now slated to exit the global leveraged loan market. Finastra had outstanding approximately $3.2 billion of a dollar first-lien loan and €853 million of a euro first-lien loan, according to S&P in October. It also had a $1.25 billion second-lien term loan. 

Finastra now faces higher interest payments despite having shifted $1 billion into preferred equity that will pay in PIK, according to Bloomberg calculations. S&P and Moody’s Investors Service downgraded the company and the debt citing expectations for higher interest costs for any new debt given market conditions. 

Private lenders are awaiting allocations of the $4.8 billion loan, which is expected later this week. The final hurdle, negotiations over the credit agreement that governs the loans and provides lender protections, was completed in recent days.

London-based Finastra was formed from a 2017 merger between Misys Group and D+H Corp. 

–With assistance from Reshmi Basu.

(Updates throughout, adds higher interest expense burden.)

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