(Bloomberg) -- Quorum Software locked in lower borrowing costs on a private credit loan thanks to strong demand from direct lenders that exceeded more than six times the amount of money the company asked for, according to people with knowledge of the matter.
The software provider for the oil and gas industry closed an $865 million unitranche deal in early November, the people said, asking not to be identified discussing a private transaction. Direct lenders put in orders for more than $6 billion of debt, they added.
That allowed the company, which is owned by private equity firm Thoma Bravo, to snag more favorable pricing terms of 4.75 percentage points over the Secured Overnight Financing Rate and an original issue discount of 99.5 cents on the dollar, compared to 5 percentage points and 99 cents originally discussed with lenders, they added.
The transaction is refinancing the company’s existing debt at overall cheaper 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 credit lenders are hungry to put billions of dollars raised in recent years to work amid a dearth of new acquisition and buyout deals. These firms are competing against each other and 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 borrowing rates through refinancing existing debt.
Quorum Software has also benefited from growth, with earnings before interest, taxes, depreciation, and amortization growing more than 10% each year over the last 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 the oil and gas software business from TietoEVRY as part of the deal. Though the companies were combined, the business still had separate debt from Quorum and Aucerna, which the November transaction refinanced into one capital structure, the people said.
Before the new deal, the company had two loans from Quorum Software: a $340 million first-lien leveraged loan and $125 million of second-lien debt, with margins of 4.25 percentage points and 8.5 percentage points, respectively, over the benchmark rate, including a credit spread adjustment. The business also had a $350 million unitranche from Aucerna at 6.5 percentage points over the benchmark, plus an adjustment, they added.
The new $865 million, seven-year unitranche matures in 2031, and the margin could step down to 4.5 percentage points over the benchmark if leverage drops below five times, as it’s expected to do in the coming months, they added. Following the transaction, net leverage, a measure of debt to earnings, sits at around 5.5 times based on roughly $150 million of Ebitda, they added.
The lender group also included Ares Management Corp., Blackstone Inc., Antares Capital, Carlyle Group Inc., Cliffwater, Goldman Sachs Group Inc’s asset management arm, Thoma Bravo’s credit 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 firms did not immediately respond to requests for comment.
While new acquisition and buyout volume has remained relatively muted, market participants expect an increase in 2025 following President-elect Donald Trump’s return to the White House and amid pressure on private equity firms to buy and sell companies.
(Updates last paragraph with outlook on market. An earlier version corrected wording in sixth paragraph to issuer-friendly environment.)
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