(Bloomberg) -- K2 Insurance Services is seeking to cut borrowing costs by swapping private debt that helped fund the firm’s buyout with a new leveraged loan.
The company on Monday launched a $500 million deal led by JPMorgan Chase & Co. to refinance privately placed debt and fund a dividend, according to people familiar with the matter who aren’t authorized to speak publicly and asked not to be identified. The refinancing involves a $440 million loan due in 2030 that made up the bulk of last year’s lending package, the people said.
Price talk for the new loan is for a margin 3.75 percentage points above the Secured Overnight Financing Rate, offered at 99.5 cents on the dollar, a person said. The current financing’s spread is 6.75 percentage points and was issued at 97 cents. Lenders including JPMorgan and HPS Investment Partners led that private credit deal, Bloomberg News previously reported.
Those two lenders and Warburg Pincus & Co., which acquired K2, all declined to comment.
A growing number of borrowers are trading in their private credit debt for broadly syndicated leveraged loans, taking advantage of still-intense competition in between those markets to lower interest costs. Circor International Inc. and Alegeus Technologies, both of which are owned by private equity firms, are also in the market to refinance their private credit debt with new leveraged loans.
Issuance has been running at a record pace this year, with activity fueled by loan repricings and refinancings.
Direct lenders have been sweetening terms to remain competitive, offering payment-in-kind and delayed-draw term loans — products that are difficult to do in the broadly syndicated market — to win certain deals. More than 20 private credit lenders recently provided a $3.2 billion debt package to support Smartsheet Inc.’s buyout.
--With assistance from Paula Seligson.
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