FinThrive refinancing is the latest way to benefit some creditors

(Bloomberg) — Health care software company FinThrive’s debt refinancing announced this week includes substandard exchanges and better terms for creditors who made the deal, according to people familiar with the situation.

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The Clearlake Capital Group-backed company’s revamped debt stack will include first-out, second-out, third-out and four-out term loans that reset the hierarchy of repayments, said the people, who asked not to be identified while they discussed a private deal. . They added the $155 million in new money because part of the deal will have the same value as the first-out loan, and Clearlake subordinates its debt to the fourth-out paper.

The deal will reduce FinThrive’s debt load by more than $100 million, lower interest costs and extend the life of the revolver, some people said.

The refinancing was downgraded to a majority of FinThrive’s first- and second-lien loan holders and is open to all creditors, the company said Monday in the statement announcing the deal. Those who brokered the transaction would receive a larger share of the higher liabilities, according to the people.

Deals that offer more favorable terms to select creditors have become more popular as companies negotiate loose credit agreements with investors eager to improve their returns.

A representative for Clearlake declined to comment, while messages left with FinThrive were not returned.

First-lien lenders who didn’t negotiate the deal can swap their 80 cents on the dollar debt for a mix of first-, second- and third-out paper, the people said. Of the total mix, these lenders could get about 40% of the third-out paper. Non-negotiating lenders can swap second-lien loans for a combination of second- and third-lien loans for about 65 cents, according to the people.

Those who don’t agree to the swap will be sent to the back of the repayment line and stripped of certain protections and liens on collateral, the people said, adding that interest payments on their existing loans could be deferred until maturity. Such coercive elements have become standard practice in recent debt restructurings, which creditors generally agree to to avoid coming under pressure.

Brokers on Tuesday quoted the new first-out loan at about 98 cents on the dollar, the second-out loan at about 80 cents and the third-out loan at 50 cents, according to people familiar with the pricing. FinThrive’s existing first lien loan due 2028 fell to a record low of 58 cents, down from 68 cents on Monday, according to data compiled by Bloomberg.

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