Strong LevFin Conditions Attract Issuers to Tap BSL Market to Refinance Private Credit Debt

Amid strong market conditions heading into the latter half of the year, several issuers with existing private credit debt have opted to tap the broadly syndicated loan market to refinance at lower margins.

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

As a result, deals to refinance private debt credit, such as Finastra, Duck Creek and Cooper Machinery Services, have attracted notable buy-side interest. For the first half of 2025, more than $250 billion of new loans and bonds was raised to extend maturities and refinance existing debt, with refinancings dominating primary activity, according to Octus data.

Market participants say private credit debt being refinanced in the BSL market will only continue, as a significant number of leveraged buyout deals were financed with private credit at wide margins over the past few years, with several of them having call periods expiring soon.

Private credit is certainly useful for financing LBO deals, noted one leveraged finance banker, but pricing will still come wider than what the public market can offer, which ultimately makes it more desirable for issuers to refinance in the BSL market at some point in the future.

The banker also noted that it makes sense for companies with both first and second lien debt to collapse their debt into one first lien structure, allowing them to simplify their capital structure at a better rate. As a result of this dynamic, more issuers will look to refinance private credit debt structures in the BSL market, they said.

Duck Creek is one recent example – the Vista Equity-backed insurance software developer received strong demand on its $890 million first lien term loan to refinance private debt, Octus reported, which enabled the company to replace its structure of first and second lien debt with only first lien debt.

In the case of Vista Equity-backed Finastra, the financial software developer was able to recently refinance its existing $4.8 billion private credit loan, led by Oak Hill in 2023, by shaving off about 300 bps in the BSL market. Despite concerns about the company’s high leverage, the deal received strong demand from investors, Octus reported. Elsewhere, Cooper Machinery Services recently marketed a $700 million seven-year term loan to refinance its private debt and fund shareholder distribution, Octus reported.

One leveraged finance investor emphasized that spreads between public and private markets have compressed, adding that unless issuers are seeking a specific buying relationship with a lender in the private market, they are coming back to the public market.

A second investor echoed a similar sentiment on borrowers running back to the BSL market given how hot the market has been. This is to be expected, they added, because private credit is likely unable to hit return thresholds as spreads compress. A third investor cited looser documentation on deals in the public market as another reason the BSL market is attracting private credit debt refinancings.

Overall, with M&A and LBO activity not expected to pick up until late 2025 or early 2026, investors say that deals refinancing private debt, as well dividend deals, will continue to play out as issuers and sponsors get creative with capital.

Nonetheless, leveraged finance participants acknowledged that if volatility strikes the market, issuers can easily pivot back to private credit, where there will still be plenty of money to fund deals.