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Octus on Credit: Private credit debt flocks to BSL market for refinancing

Katherine Schwartz, Primary Reporter

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In recent weeks, issuers with existing private credit debt have been taking advantage of strong market conditions by refinancing in the broadly syndicated loan (BSL) market, where they can shave off hundreds of basis points from their borrowing costs.

A vast majority of the new paper in the primary market this summer has been dominated by deals refinancing private credit debt as well as funding dividends, buy-siders say, owing to a lack of supply from M&A and LBO activity.

The financial incentives are compelling, as recent deals demonstrate:

  • Finastra: Vista Equity-backed financial software developer refinanced its $4.8 billion private credit loan (led by Oak Hill in 2023), cutting margins by 300 basis points and generating roughly $21 million in annual cashflow savings
  • Duck Creek: Vista Equity-backed insurance software developer used its $890 million first lien term loan refinancing to collapse first and second lien debt into a simplified single first lien structure
  • Verint and Cooper Machinery Services: Also attracted notable buy-side interest in their private credit refinancing transactions

This trend will only accelerate, market participants say, as a significant number of leveraged buyout deals financed with private credit at wide margins over the past few years have call periods expiring soon.

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