Private Credit Firms in Talks on $3.4 Billion Hyland Loan Package

A group of private-credit lenders are in talks to extend a $3.25 billion loan to Hyland Software Inc. so the company can refinance debt, marking the latest example of a borrower turning away from the leveraged loan market.

(Bloomberg) — A group of private-credit lenders are in talks to extend a $3.25 billion loan to Hyland Software Inc. so the company can refinance debt, marking the latest example of a borrower turning away from the leveraged loan market.

The transaction also includes a $150 million revolving credit facility, putting the total package at $3.4 billion — making it one of the largest private credit deals on record as direct lenders compete more on refinancing existing debt, not just funding new leveraged buyouts.

Golub Capital is expected to lead the transaction, and Ares Management Corp., Blue Owl Capital Inc. and Oak Hill Advisors are among those that have discussed participating in the deal, according to people familiar with the matter, who asked not to be named discussing a private transaction that’s yet to be finalized.

Pricing is being discussed at 600 basis points over the Secured Overnight Financing Rate at a discounted price of 98.5 cents on the dollar, they said.

The proceeds would refinance the Thoma Bravo-owned software company’s outstanding $2.5 billion first-lien loan, a $670 million second-lien loan and a revolving credit facility, according to the people.

Representatives for Golub, Ares, Blue Owl and Oak Hill declined to comment. Representatives for Thoma Bravo and Hyland Software didn’t immediately return requests for comment.

This is the latest example of borrowers tapping private credit to refinance debt. These specialized lenders, which bypass banks to directly loan money to companies, can offer greater flexibility, such as the ability to pay interest with more debt instead of cash.

Leveraged loans are marketed to a broad group of institutional asset managers, some of whom have grown more reticent to lend as high interest rates squeeze some companies. Both private credit and leveraged loans are floating rate debt.

A different group of lenders led by Oak Hill and Blue Owl is providing a record-breaking $5.3 billion loan package to refinance the debt of Finastra Group Holdings Ltd.

Higher interest rates have squeezed companies that borrowed with floating-rate loans and now face higher annual interest expense. While the leveraged loans market saw a rebound of new issuance in recent weeks, the biggest buyers of the debt have been sitting on the sidelines for much of this year and the pace of new deals has slowed.

Hyland Software’s existing first-lien loan comes due in July 2024, according to data compiled by Bloomberg, but companies typically refinance debt at least one year in advance.

(Updates first two paragraphs with context on size.)

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