Thoma Bravo-backed cybersecurity company Sophos is turning to its existing leveraged-loan lenders as it seeks to refinance or extend more than $2bn of debt, after attempts to secure private credit financing failed to gain traction, according to a report by Bloomberg.
The company could offer investors more attractive terms, including a higher interest coupon, additional amortisation and tighter financial covenants, according to people familiar with the discussions. A transaction could be launched as soon as next month, although the terms remain under negotiation and could change.
Thoma Bravo, which acquired Sophos in 2020, has indicated that it does not intend to provide additional equity capital as part of the refinancing, despite some lenders raising concerns about the impact of artificial intelligence on the software business, the people said.
Sophos has been working for several months on the refinancing of a $2.1bn term loan due in March 2027. Several private credit investors previously declined to participate despite being offered a substantial increase in yield.
The company is now hoping that improved operating performance will help attract support from the syndicated loan market. Sophos reported 6% year-on-year growth in annual recurring revenue for the three months to the end of June, while adjusted EBITDA increased 10% to around $120m.
Its term loan has also recovered from levels seen during the sharp sell-off in software credit earlier this year. The debt was recently trading at about 96.88 cents on the dollar, compared with 92.69 cents in February.
The refinancing represents another important test for Thoma Bravo, one of private equity’s largest software-focused investors, as lenders continue to scrutinise the sector’s vulnerability to AI-driven disruption.
The firm was forced to offer significant concessions to lenders last month to complete a roughly $5bn refinancing for another portfolio company, Proofpoint. Thoma Bravo’s software exposure has also come under pressure following the loss of control of customer-experience software provider Medallia, after creditors took over the company earlier this year.
Sophos’ effort to return to the broadly syndicated loan market therefore comes at a sensitive point for the sponsor and the wider software buyout sector. The willingness of lenders to accept revised terms without fresh sponsor equity is likely to be closely watched as investors assess refinancing risk across highly leveraged technology companies.
