Buyout firms are taking advantage of a rebound in the broadly syndicated loan market to refinance existing private credit facilities with cheaper debt.
Tariff concerns at the start of the year led to pulled deals and a two-week market freeze in April, but conditions have normalized and lenders are ramping up activity.
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Capital that was trapped in hung deals earlier in the year is now chasing limited primary supply (with a continued shortage of new platforms), driving banks to bid aggressively for refinancings. McDermott Will & Emery tallies data show borrowers capturing average savings of 263 bps versus private credit pricing.
Vista Equity Partners is among the firms taking the opportunity to cut interest expense across its portfolio.
Including last week’s $4.1 billion refinancing for Finastra, the firm has swapped more than $9 billion of direct loans at four companies for cheaper broadly syndicated facilities. In total, the refinancings reduce portfolio-wide interest expense by at least $200 million.
Finastra shows the math: its first-lien pricing drops to S+400, down from S+725 in last year’s direct lending package; the second-lien tranche is expected to price at S+700. Vista achieved similar outcomes in earlier refinancings for Avalara, KnowBe4, and Duck Creek.
“Sponsors have been really active in refinancing names from private credit into the broadly syndicated market,” BC Partners head of credit Ted Goldthorpe told Bloomberg. “If the company is performing well, and can save a good portion on its debt by refinancing, we’ve seen the broadly syndicated market be really competitive.”
On new platforms, sponsors have favored dual-track processes this year to maintain a direct lending backstop in case BSL market conditions worsen.
Private credit has responded by tightening pricing, continuing the trend of gradual yield compression as the market matures. Options like payment-in-kind arrangements or portability provisions are also becoming more popular as lenders work to stay competitive with cheaper syndicated offerings.