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Thoma Bravo eyes private debt for $3.5bn ConnectWise financing

Thoma Bravo is reaching out to private credit lenders as it looks to secure approximately $3.5bn in new financing for its automated professional services provider, ConnectWise, according to a report by Bloomberg.

The report cites unnamed sources familiar with the matter as confirming that the financing will be used to refinance existing debt and fund an acquisition. Direct lenders are being asked to provide leverage exceeding seven times the combined company’s earnings, according to Bloomberg’s sources with Thoma Bravo also in discussions with banks over the financing.

While banks typically offer the lowest pricing, putting pressure on private credit lenders, direct lenders can compete by offering higher leverage. According to PitchBook data, banks’ broadly syndicated first-lien loans have averaged less than five times leverage over the past year.

The ongoing competition between banks and private credit for financing leveraged companies has recently seen traditional lenders regain some lost ground. However, securing the ConnectWise deal would signify a shift in the company’s capital structure away from banks and a victory for the $1.7 trillion private credit industry.

Details of the deal are subject to change, according to Bloomberg’s sources.

Thoma Bravo acquired ConnectWise in 2019 and secured a $1.1bn credit package in 2021, priced at 350 basis points over the benchmark, led by Bank of America Corp, to refinance private credit, according to Bloomberg data.

This financing effort follows an unsuccessful attempt to sell the company more than a year ago, according to one source. In a market where private equity sponsors have struggled to offload portfolio companies, many have turned to private lenders to facilitate add-on acquisitions or dividend recapitalisations.

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