(Bloomberg) -- Alegeus Technologies is looking to score about $75 million in interest savings through refinancing the private loan that Vista Equity Partners used to take the company private in 2018 as pricing remains competitive in public markets.
The healthcare benefits company is tapping the public leveraged loan market for a $525 million 5-year offering that will be used to repay the debt as well as fund a distribution to Vista, according to a person familiar with the matter who asked not to be identified because the information is private.
Initial pricing discussions call for a margin between 5 and 5.25 percentage points over the Secured Overnight Financing Rate, offered at a discounted price of 98 cents, the person said. That’s substantially cheaper than the private loan the company obtained at 8.25 percentage points over the benchmark, according to regulatory filings for business development companies that hold the debt.
Golub Capital and New Mountain Capital hold portions of the private loan in their respective business development companies, according to regulatory filings for the funds. A representative for New Mountain declined to comment while Golub did not respond to a request for comment.
Assuming the size of the new loan is the same as the debt it’s refinancing, the all-in spread savings for the company equates to $75 million over the life of the loan including the discounted price of 98 cents, according to Bloomberg calculations.
S&P Global Ratings assigned a B rating to the offering. The all-in spread for single B rated loans sits at 382 basis points in 2024, according to data compiled by Bloomberg, which is cheaper than what many private credit deals offer.
Bank of America is leading the transaction and a lender call was held Sept. 19. Commitments are due Oct. 1 at 5 p.m., the person said.
Representatives for Bank of America and Vista declined to comment. Alegeus didn’t respond to a request for comment.
A handful of borrowers have swapped private credit financing for cheaper debt in the broadly syndicated market as pricing remains competitive. In the beginning of the year, Veritas Capital’s Wood Mackenzie refinanced private unitranche debt in the public markets, which amounted to about $37 million in annual cost savings, according to Bloomberg calculations.
(Updates with holders of private loan in fourth paragraph.)
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