Private credit funds are providing a record €4.5 billion ($4.9 billion) loan to back the buyout of Adevinta ASA, marking the latest win for a market that’s increasingly become the go-to funding source for private equity firms.
The Canada Pension Plan Investment Board, Blackstone Inc.’s credit unit and Singaporean sovereign wealth fund GIC are among the biggest lenders in the deal, people with knowledge of the matter said. Intermediate Capital Group Plc., Arcmont Asset Management, Sixth Street Partners, and the asset management arm of Goldman Sachs Group Inc. are also top-tier participants, the people said, asking not to be named because the information is private.
They’re providing the funds to a private equity-consortium led by Permira and Blackstone, which offered to purchase Adevinta in a deal that values the European classifieds company at about €14 billion, including debt. The buyout loan is structured as a unitranche, a blend of senior and subordinated debt that’s popular among private credit lenders.
Read more: Private Credit Titans Are Grabbing More Than Half of New Deals
At current exchange rates, it tops a $4.8 billion unitranche loan for Finastra Group Holdings Ltd. that a separate group of lenders inked a few months ago.
Adevinta is also receiving a €250 million revolving credit facility, bringing the total size of the financing to €4.75 billion, some of the people said. Finastra’s overall financing package was slightly larger at $5.3 billion, including a $500 million revolver.
The lender group for Adevinta also includes PSP Investments, Apollo Global Management Inc., Blue Owl Capital Inc., Caisse de Depot et Placement du Quebec, Oaktree Capital Management and Oak Hill Advisors, the people said.
Representatives for Permira, Blackstone, CPPIB, GIC, ICG, Arcmont, Sixth Street, Goldman, Apollo, Blue Owl, CDPQ, Oaktree and Oak Hill declined to comment. PSP didn’t respond to a request for comment.
The record unitranche further demonstrates the $1.6 trillion private credit market’s significance for buyout funding. The industry has proven to be a viable alternative to the syndicated high-yield bond and leveraged loan markets, especially since interest rates began to rise.
“Private credit continues to dominate the leveraged finance markets across all transaction sizes, despite the heightened interest rate environment,” said Aymen Mahmoud, co-head of the finance, restructuring and special situations group in London for law firm McDermott Will & Emery.
Read more: How Private Credit Gives Banks a Run for Their Money: QuickTake
In Adevinta’s case, banks actively competed with private credit firms to underwrite the massive financing and sell it down to investors. But the proposal from banks was less appealing in part because they weren’t keen to offer a package entirely denominated in euros due to the weakened state of the European leveraged loan market, Bloomberg previously reported.
The unitranche was issued at 5.75 percentage points over the Euro Interbank Offered Rate and at a discounted price of 98 cents on the dollar, according to some of the people. That compares with a rate of 7.25 percentage points over the US benchmark for Finastra.
--With assistance from Boris Korby.
(Updates with quote in ninth paragraph and further declines to comment)
Author: Silas Brown, Lisa Lee and Swetha Gopinath