Brookfield Business Partners has agreed to subordinate around $675m of its debt in CDK Global as part of a proposed liability management transaction designed to extend the software provider’s debt maturities, according to a report by Bloomberg.
Under the agreement with a group of creditors, Brookfield would exchange its existing debt holdings for lower-ranking securities, with interest paid in kind rather than in cash. The structure would allow CDK to preserve liquidity while reducing near-term cash interest requirements.
In return, lenders represented on the creditor steering committee would exchange secured debt due in 2029 for new obligations maturing approximately two-and-a-half years later. The new debt would be issued at an 8% discount, according to people familiar with the negotiations.
The proposed restructuring also contains a provision that could result in Brookfield receiving a larger discount on debt it purchases in the secondary market before the transaction closes. The potential additional haircut would be capped at around $1.2bn of debt purchases, equivalent to a discount of as much as 13%.
CDK’s nearly $4bn term loan due in 2029 was trading at around 52 cents on the dollar on 28 August, underscoring the pressure facing the company’s capital structure.
The restructuring comes as CDK continues to contend with weaker earnings and elevated leverage following a major cyberattack in 2024 that disrupted its operations and affected thousands of car dealerships.
The company is being advised by PJT Partners, while creditors are working with Houlihan Lokey and law firm Gibson Dunn & Crutcher. Members of the creditor group are bound by a cooperation agreement that prevents them from breaking away from the consortium to pursue separate arrangements.
Brookfield and Houlihan Lokey declined to comment. CDK, PJT and Gibson Dunn did not respond to requests for comment.
The company is expected to continue discussions with lenders that are not part of the steering committee. Any subsequent agreement will need to provide those creditors with terms no more favourable than those offered to members of the existing group.
The deal follows a deterioration in CDK’s credit profile. Moody’s Ratings downgraded the company by two notches to Caa2 in early August, citing high leverage, subdued revenue and refinancing risks.
CDK also appointed Sudhakar Ramakrishna as chief executive last week, adding a new CEO as the business works through its operational and balance-sheet challenges.
