(Bloomberg) -- Golub Capital led a roughly $1 billion private debt facility to support TA Associates acquisition of Momentive Software, a carveout from Community Brands, according to people with knowledge of the matter.
The deal, which some market participants viewed as aggressively structured, included a roughly $700 million term loan that equates to about a 70% loan-to-value, a risk assessment measure that examines the ratio of the loan to the value of the underlying asset, said the people, who asked not to be identified discussing a private transaction. The deal included a delayed draw term loan and revolver, according to a press release.
That LTV is significantly higher than averages in the private credit market, which tend to stay around 40%. Even Golub tends to stay well below that, as one of its private credit funds has an average LTV of 41.4% as of March 31, according to a Moody’s report dated June 14.
The loan was provided to support a transaction that is generally viewed as risky. Momentive Software — the newly-created entity from Community Brands’ association and events and nonprofit solutions divisions — will be operating on a standalone basis offering cloud-based software, services and payment offerings for the first time.
Golub and private equity firm TA Associates declined to comment, while Community Brands did not respond to requests for comment.
Despite the higher risk, the loan was priced at 5.25 percentage points over the Secured Overnight Financing Rate and an original issue discount of 98 cents on the dollar, according to the people.
Pricing on private credit loans have reached new lows in recent months as lenders aim to win the few deals in the market and remain competitive against public market peers. Lenders have also been sweetening terms on deals to strengthen relationships with private equity sponsors and prevent market share from shifting back to the broadly syndicated market.
Golub, which served as administrative agent and sole lead arranger on the deal, had intended to syndicate it post closing, a measure used by some private credit managers to de-risk and sell down exposure to single names, according to the people.
The syndication process struggled as other potential buyers viewed the investment as too cheaply priced relative to the perceived risks since they expect Momentive Software’s growth to be slower compared to other tech companies and the higher LTV, the people added. However, the press release said that Golub’s capital markets team successfully led a “oversubscribed syndication of a group of 15 diverse lenders.”
The private credit firm has been a lender to Community Brands since 2018 and has a longstanding relationship with TA.
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