The company has a $3.582bn TLB maturing in June 2024. The loan carries a Libor+ 350bps coupon. It is currently quoted in the low 90s, according to a trading desk, up from quotes of around 89 before the earnings were released.

In recent quarters, buysiders have bemoaned its weak cash generation, high leverage and floating-rate capital structure, which leaves it exposed to rising interest rates. One source said they might be wary of a term loan A&E as Finastra is “not a great performer.”

Better quarter

Another source, however, noted the company’s improving performance in recent months.

“They should be able to figure something out,” the source said. “The company is doing better, and the business is not spiraling downwards.”

The second quarter of the company’s 2023 fiscal year ended in November 2022. As of that date, LTM covenant EBITDA was $677m, up from $675m in the previous quarter. That puts leverage at 8.4x, based on nearly $5.7bn in total debt (the company has a second lien TL as well as its TLB).

The company also reported a less conservative adjusted LTM EBITDA figure of $864m, which includes $105m of pro forma cost savings and $84m in deferred revenue. That implies leverage of 6.5x, which lenders might find more palatable.

Total sales for the quarter were $472m, a 4% year-over-year increase. The increase was driven in part by a new license agreement, a source noted.

In recent months, Finastra has drawn heavily from its $385m RCF, which matures in March 2024; some $326m was drawn from the facility as of the end of the company’s second quarter. The company has $94m in cash on its balance sheet.

Refi runway

Vista Equity Partners bought Finastra’s predecessor Misys back in 2012, later merging it with other entities and eventually rebranding it in 2017.

On yesterday’s call, the sponsor said it had reached out to lenders who have signaled they would be supportive of a transaction to help the company address its upcoming term loan maturity, sources said.

A group of existing lenders has organized with PJT Partners as financial advisor and Gibson Dunn as counsel in advance of the 2024 maturity, according to a report from Bloomberg last month. Finastra has previously considered selling divisions or launching an IPO.

S&P recently downgraded the business’ CFR to CCC+, partly due to bigger than expected cash outflows. The downgrade was seen as overly harsh by some buysiders, as we recently reported.

Finastra and Vista did not respond to requests for comment.