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  • Writer's pictureShernel Thielman

Private Lenders Secure Favorable Terms in Guidehouse Debt Amidst Bain Capital Buyout

Private lenders, led by Blackstone Inc., have improved the conditions of Guidehouse Inc.'s existing debt ahead of its acquisition by Bain Capital Private Equity. Despite the typical replacement of existing debt during a change of control, Guidehouse's private credit lenders successfully fought to retain their involvement. Blackstone and HPS Investment Partners, the primary lenders, reduced the interest rate on Guidehouse's $3.075 billion loan and $250 million revolver to dissuade Bain from seeking refinancing from banks. The rate cut, from 6.25% to 5.5% over the Secured Overnight Financing Rate, made the terms more competitive with bank offerings.

To further enhance their proposal, Blackstone and HPS agreed to acquire stakes from other private credit managers looking to exit the reshaped debt package. This move signifies another victory for private credit lenders in their ongoing competition against bank underwriters, as they offer more flexible terms that banks find challenging to match.

While representatives for Bain, Blackstone, and HPS declined to comment, the concessions granted to private lenders illustrate the intensifying battle between banks and private credit lenders in the face of improved market conditions. The ongoing competition is evident in the fight for financing in various deals, such as the Cotiviti buyout.

Guidehouse's private lenders also introduced a payment-in-kind (PIK) option, allowing 2% interest payment with additional debt for up to two years. They extended the debt's maturity from 2028 to 2030 and, in return for the concessions, added new call protections. As part of the buyout, Bain is injecting fresh equity into the company.

HPS will maintain a $500 million preferred equity investment, with the instrument paying interest entirely in-kind at a rate of 13.75%. It includes an amendment to decrease to 12.75% if Guidehouse lowers its overall leverage over time. Notably, the Guidehouse debt will remain in place through the change of control, thanks to a provision known as portability. Disclaimer: This article is for informational purposes only and does not constitute financial advice or a recommendation to invest. The details provided are based on publicly available information, and readers are encouraged to conduct their own research and seek professional advice before making any investment decisions.

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