(Bloomberg) — Quorum Software secured lower financing costs for a private equity loan thanks to strong demand from direct lenders that exceeded more than six times the amount of money the company was asking for, according to people with knowledge of the matter.
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The software provider for the oil and gas industry closed a unitranche deal worth $865 million in early November, the people said, asking not to be identified discussing a private transaction. Direct lenders placed orders for more than $6 billion in debt, she added.
This allowed the company, owned by private equity firm Thoma Bravo, to secure more favorable pricing terms of 4.75 percentage points above the Secured Overnight Financing Rate and an original issue discount of 99.5 cents on the dollar, compared to 5 percentage points and 99 percentage points. cents originally discussed with lenders, they added.
The transaction refinances the company’s existing debt at generally lower rates, and the package also includes an $85 million revolving credit facility, the people said.
Representatives for Thoma Bravo and Apollo Global Management Inc., which led the debt deal, declined to comment.
Private lenders are hungry to put to work the billions of dollars raised in recent years amid a lack of new acquisition and buyout deals. These companies compete with each other and with the leveraged loan and junk bond markets for a relatively small number of transactions, leading to more demand than supply. That issuer-friendly environment has allowed companies to obtain attractive interest rates by refinancing existing debt.
Quorum Software has also benefited from growth, with earnings before interest, taxes, depreciation and amortization rising more than 10% annually over the past three years, the people added.
Energy software
Thoma Bravo bought Quorum Software in 2018 and then merged it with Aucerna in 2021, while also acquiring TietoEVRY’s oil and gas software business as part of the deal. Although the companies had been combined, the company still had separate debt from Quorum and Aucerna, which was refinanced into a single capital structure through the November transaction, the people said.
Before the new deal, the company had two loans from Quorum Software: a $340 million first lien loan and a $125 million second lien loan, with margins of 4.25 percentage points and 8.5 percentage points above the benchmark rate, respectively, including an adjustment of the credit spread. The company also had a $350 million unit tranche from Aucerna at 6.5 percentage points above the benchmark, plus an adjustment, she added.
The new $865 million, seven-year unitranche matures in 2031, and the margin could fall to 4.5 percentage points versus the benchmark if leverage falls below five times, as expected in the coming months, she added . After the transaction, net leverage, a measure of the ratio of debt to earnings, is about 5.5 times, based on about $150 million of Ebitda, she added.
The lender group also included Ares Management Corp., Blackstone Inc., Antares Capital, Carlyle Group Inc., Cliffwater, the asset management arm of Goldman Sachs Group Inc, Thoma Bravo’s lending business, Diameter Capital Partners, HPS Investment Partners, Jefferies Financial Group Inc . , Canal Road Group and New Mountain Capital.
Representatives for Ares, Blackstone, Antares, Carlyle, Goldman Sachs and Diameter declined to comment. Representatives for the other companies did not immediately respond to requests for comment.
Although the volume of new acquisitions and buyouts has remained relatively subdued, market participants expect an increase in 2025 following the return of newly elected President Donald Trump to the White House and pressure on private equity firms to buy and sell companies.
(Last paragraph updated with market outlook. An earlier version corrected the wording in the sixth paragraph to reflect an issuer-friendly environment.)
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