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Banks and private credit firms compete for PowerSchool buyout

Private credit lenders and banks are vying to offer debt financing for a potential acquisition of US education software provider PowerSchool Holdings, according to a report by Bloomberg citing people with knowledge of the matter. 

Ares Management, HPS Investment Partners, Blackstone and Blue Owl Capital are among the direct lenders aiming to provide an approximately $3bn debt package for the transaction. The financing could include a $2.4bn funded term loan, a $500m delayed-draw term loan and a $300m revolver. Banks are also said to be offering competing packages that include a smaller amount of debt and preferred equity. 

PowerSchool is based in Folsom, California and has reportedly also attracted interest from private equity firms Warburg Pincus and Bain Capital. Private equity firms Onex and Vista Equity Partners currently own about 63% of PowerSchool’s outstanding shares. 

The proposed amount of funded debt from private lenders would be significantly higher than seven times PowerSchool’s earnings, according to Bloomberg’s sources, which banks may struggle to match due to regulatory constraints. 

Bloomberg reported that PowerSchool has formed a special committee of its board of directors to work with an unnamed investment bank. 

At a time when leveraged buyouts have been subdued — with the few progressing deals witnessing intense competition between banks and private credit lenders — private credit firms have been pushed to reduce pricing and improve terms. 

Last month, a group of direct lenders offered EQT a loan for its acquisition of supply chain risk-management software provider Avetta, at one of the lowest rates on record. 

According to Bloomberg, private credit lenders are also discussing the provision of $735m of debt to support Vista Equity Partners’ acquisition of Model N. 

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