(Bloomberg) -- Private credit lenders have agreed to take ownership of Pluralsight Inc., three years after Vista Equity Partners bought the educational-software company, in a markedly swift unraveling of a private equity investment.
The proposed restructuring is expected to wrap up as soon as Thursday after months of negotiations, according to people with knowledge of the matter, who were not authorized to speak publicly.
A group of lenders led by Blue Owl Capital Inc. is injecting about $275 million of new money into Pluralsight in the form of loan facilities, with roughly $125 million funded as of this week, the people said.
The restructuring eliminates roughly $1.2 billion of debt, which is being converted into equity, they said. The lenders will own around 85% of the company, with the remaining equity going to the company’s management, they added.
This deal means Vista and its co-investors are losing around $4 billion on their original equity investment, they said.
Representatives for Vista, Blue Owl and Pluralsight declined to comment.
Pluralsight was thrust into the spotlight several months ago, when some assets were moved to a subsidiary as part of an effort to raise fresh funds. That move was reminiscent of aggressive tactics that have become commonplace in the broadly-syndicated loan market. It was a watershed moment for private-credit lenders, who’ve long touted stricter documentation and chummier dealings when companies fall into distress.
Due to cases like Pluralsight’s asset transfer, lenders are increasingly demanding new protections to avoid future liability-management transactions. The broadly syndicated loan market had long forgone such protections, leaving room for lenders to be stripped of their collateral.
Representatives for additional lenders involved in the transaction, including Ares Management Corp., Oaktree Capital Management, Benefit Street Partners, BlackRock Inc., Guggenheim Investments Inc. and Goldman Sachs Group Inc’s asset management arm declined to comment. Representatives for Golub Capital did not immediately respond to requests for comment.
Vista bought Pluralsight in 2021. Though it was a time when software companies commanded big valuations, some on Wall Street as well as certain shareholders thought Pluralsight could have fetched more.
By late 2023, however, the firm had began to stumble under pressure from a confluence of higher interest rates, increased competition and softening demand for its services, one of the people said. That exacted a significant cost on its debt-laden balance sheet.
Private credit became a go-to lender for firms like Vista Equity, especially in the post-pandemic era as fund managers with hundreds of billions of dollars in dry powder rushed to fill a vacuum left by traditional bank lenders. Now, the credit funds are increasingly taking the keys of companies that have run into similar challenges as Pluralsight.
Private credit funds including Blackstone Inc. and HPS Investment Partners have been building up their expertise in restructurings and workouts, in anticipation of rising stress, Bloomberg reported.
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