Morgan Stanley is exploring a potential $4bn debt refinancing for Vista Equity Partners-backed Finastra Group Holdings and is assessing both syndicated loan and private credit options, according to a Bloomberg report citing sources familiar with the matter.
In 2023, Finastra raised approximately $5.3bn in one of the largest-ever private credit transactions, led by Oak Hill Advisors. The transaction also included participation from Blue Owl Capital, Ares Management, HPS Investment Partners, and KKR, alongside approximately $1bn of preferred equity from Vista.
The deal, which carried a spread of 7.25 percentage points over the Secured Overnight Financing Rate (SOFR), was among the most expensive financings at the time, according to SEC filings from business development companies holding the debt.
While discussions remain at an early stage and a refinancing is not guaranteed, sources indicate that Finastra’s financial performance has improved, broadening its financing options. Before its ratings were withdrawn following the private credit deal, S&P Global Ratings had downgraded Finastra to CCC+ from B-, citing elevated interest expenses in the event of a refinancing.
The potential refinancing comes amid a highly active credit market, with both banks and private credit lenders competing aggressively for deals.
More than $300bn in US leveraged loans have priced in the syndicated market so far this year, with the majority allocated to repricing and refinancing existing debt, according to Bloomberg data. Banks are increasingly offering more competitive pricing to attract borrowers that had previously turned to private credit.
In 2023, direct lenders refinanced approximately $34bn of syndicated loans, while $30bn in private credit loans transitioned to bank financing, according to a JPMorgan report.
Finastra has also been reviewing strategic options, mandating Evercore in September to explore a sale of its capital markets division, according to Bloomberg.
In January, the company appointed Chris Walters as CEO, citing his track record in driving operational improvements at financial services firms. Walters previously served as CEO of Pluralsight and Avantax.
With credit markets wide open and refinancing volumes accelerating, Finastra’s next move could provide further insights into the shifting dynamics between private credit and traditional lending.
