Primary Preview: Finastra $3.6B-Equivalent Loan to Refi Private Credit Debt Oversubscribed Despite Leverage Concerns

Despite concerns over high leverage, a $3.6 billion-equivalent loan for financial software developer Finastra earmarked to refinance its private credit debt has received strong demand from investors amid a busy week for primary activity, according to sources.

The Vista Equity Partners-backed company launched a $2.4 billion seven-year first lien term loan B and $500 million eight-year second lien term loan this week via leads Morgan Stanley and JPMorgan, respectively. Price talk on the first lien is coming at SOFR+425 bps and 98.5-99 OID, and the second lien is coming at SOFR+700 bps and 98.5-99 OID. The financing also includes an HSBC-led $700 million-equivalent euro-denominated first lien term loan B in with talk at Euribor+450 bps and 98.5-99 OID.

Proceeds from Finastra’s deal will refinance its existing $4.8 billion unitranche loan priced at SOFR+725 bps it issued in 2023 led by Oak Hill Advisors, according to previous Octus reporting. Commitments are due July 30.

After Finastra’s deal launched earlier this week, sources noted that it is oversubscribed and has been well received among buy-side participants. One of the reasons for its expected success is timing, sources noted, as the primary market has been open for corporate issuers before activity may slow down in August. For example, this week, $43.6 billion of loans priced, including $11.4 billion of new issuance from either refinancings, acquisitions or dividends. The forward market remains strong: Octus estimates $21.1 billion of loans and $4.2 billion of bonds announced and looking to price in the coming weeks.

Still, some market participants noted a few concerns for Finastra’s deal that investors are expected to take into account before getting involved. Multiple sources noted that the company’s high leverage is a major concern and has deterred many from getting involved. S&P Global Ratings released a ratings note on Finastra that mentions its adjusted leverage is expected to be 16x, or about 8.5x, excluding preferred equity that the agency views as debt-like obligations.

Finastra has a history of EBITDA addbacks, according to a leveraged loan investor who passed on the deal, which he views as contributing to high leverage. The investor added that Finastra’s EBITDA growth from 2024 to 2025 was mostly driven by incremental addbacks, which leads to uncertainty around whether reacceleration growth plans are sustainable.

Another investor passing on Finastra’s refi deal noted that concerns other than leverage include the software company’s cash burn and high loan-to-value ratio. The investor’s firm was involved in the credit prior to Finastra going to the private credit market. This time around, however, his firm is passing, he said.

Meanwhile, another investor noted that Finastra is a decent asset, but the optics around the financing makes him cautious.

One investor, who is participating in Finastra’s deal, said that despite high leverage, pricing on the deal is still above market spread and that they remain bullish on the business.

Octus reported in July that Finastra was expected to launch a refinancing of its private credit loan in the broadly syndicated loan market via JPMorgan and Morgan Stanley while also reporting that its sale of its Treasury and capital markets business to Apax Partners allows the company to downsize its loan by about $2 billion and deleverage by roughly three-fourths of a turn. Sources noted that Finastra has demonstrated growth in financial performance over the past few years and is in a healthy position to consider a refinancing.

Octus reported in January that Finastra was looking to refinance its private credit debt secured in 2023. Oak Hill Advisors led the transaction by committing roughly $800 million to the unitranche facility, along with a group of about 20 other lenders. Octus reported in April that Finastra was levered at about 6x to 6.5x and was in talks to refinance its 2023 loan led by Oak Hill Advisors. At that time, Finastra had walked away from a favorable SOFR+425 bps offer floated by JPMorgan and Morgan Stanley, which marked a steep drop from the company’s current SOFR+725 bps margin. The company then paused its refinancing efforts amid market turmoil, betting on more favorable terms ahead.

S&P Global Ratings assigned a B- issuer credit rating to Finastra this week, noting its expectations that the proposed debt issuance would result in significant interest savings and an improved debt maturity profile, despite weak credit metrics. The ratings agency’s stable outlook is based on its view that “Finastra’s cash flow will continue expanding on the back of double-digit software bookings, good cost control, and lower interest rates, resulting in FOCF to debt in the low-single-digit range over the next two years.”

Fitch Ratings assigned a B first-time long-term issuer default rating to Finastra and its wholly owned subsidiaries, citing Finastra’s “strong revenue retention, positive Free Cash Flow, established market position, and stable EBITDA margins.” The ratings agency cautioned, however, that the software company’s private equity ownership could maintain financial leverage at elevated levels and that “Finastra’s dependency on financial institutions for nearly all its revenue exposes it to uncertainty amidst the current macroeconomic environment and consolidation trends in the financial sector.”

According to Octus’ BDC Database, holders of Finastra USA’s first lien debt due September 2029, priced at SOFR+725 bps, include business development companies affiliated with Ares, Blue Owl, Fidelity, HPS, Golub and Oaktree. Octus’ Private Credit Review from June 27 flagged Vista Equity’s push-forward with Accelya’s refinancing as a potential greenlight signal for other portfolio companies that test the market, such as Finastra.

Octus’ most recent Private Analysis of Finastra can be found HERE. Octus’ Americas Covenants team completed an analysis on Finastra that can be found HERE.

JPMorgan and Finastra declined to comment. Morgan Stanley and Vista Equity Partners did not respond to requests for comment.