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Wall Street banks have thrown towels at marquee refinances aimed at repaying one of the biggest private credit transactions, in signs of turbulence in the loan market since Donald Trump took office.
According to people with knowledge of the issue, private equity firm Vista Equity Partners has decided to shelve plans to refinance or pay plans for its preferred stock of portfolio company Finastra, with nearly $6 billion in debt.
The success of refinance, an effort led by Morgan Stanley and Jpmorgan Chase, will help Vista pay the $4.8 billion high-cost debt secured within two years through the $160 million private credit market.
It would also have given Vista, one of the technology’s most well-known leveraged acquisition companies, the ability to pump Finastra in 2023 to reclaim the $1 billion that was forced to acquire private credit loans from the industry’s largest lenders, including Oak Hill, Blue Owl and HPS investment partners.
As the Federal Reserve’s aggressive fees rose, the $1 billion preferred stock invested sent shockwaves through the high-yield bonds and leveraged loan markets, resulting in a flash point. Vista had to borrow against the value of one of the funds to secure the required billion dollars.
The acquisition company was planning to use Buoyant Financial Markets earlier this year to raise a $5.1 billion senior term loan along with a $1 billion risky junior loan.
The bankers initially pitched senior loans at interest rates at just 3.75% above the sales rate benchmark, earning over 8%. They offered an additional discount on a billion-dollar junior loan, with one person being added along with the interest rate on the juicer paying 6-7.5 points above the floating rate benchmark.
However, as market volatility spiked, buyers avoided it. Bankers have sought to juice demand by increasing the interest borne by debt. They expanded the so-called spread on advanced loans to about 4.5 percentage points as their marketing efforts went more fully, but investors still sought better terms.
This is now well below the 7.25% premium on Finastra’s $4.8 billion private credit loan, but other funding has prevented Vista from moving forward with sales.
Some warned that the deal could still be revived, but that “starting in the current market” would make no sense.
Vista, Morgan Stanley and Jpmorgan declined to comment. Finastra did not immediately respond to requests for comment. Bloomberg previously reported some of the details of its debt sales.
The inability to ensure acceptable refinance conditions for Finastra shows that demand has declined in recent weeks and weak demand in the loan market.
“The market has a low appetite,” said an investor at the company that saw the Finastra loan. “It’s definitely all soft.”
March registered the largest reduction in the average price that investors have been bidding on US leveraged loans since October 2023, according to the MorningStar index.
The weaknesses of the loan market track those that involve reduced debt cravings from investors. The fear of the US economic slowdown and rising inflation rates, and this was occurring even before fallout from Donald Trump’s string of tariffs was announced to dozens of American trading partners on Wednesday, resulting in firms’ borrowing costs rising steadily.
Given that private funds tend to remain active buyers during market dislocation, softness could change the balance of power between private credit funds and leveraged loan investors.
“We’re going to see the pendulum turning back towards the private credit market,” said one banker who followed the Finastra deal after favoring the syndicated market for the past six months.
