The Unicrunch — The refinancing battle between banks and private credit firms

Anna Russi
+Peter Benson

4 October 2024•4 min read

The Unicrunch is our US private credit newsletter, in which we break down everything from unitranches to ABL lending. Find out more about 9fin for private credit here.

Seesaw

We’re all familiar with the story now: bank retrenchment has increasingly seen private credit lenders gain market share in the leverage finance markets over the years. Bank of America estimates that since 2020 around $134bn in BSL facilities were refinanced into private credit, according to a recent report.

This year, the numbers bear out that the narrative has largely continued. YTD, banks managed to snatch roughly $33bn off the hands of private credit lenders, BofA data shows. Conversely, private credit firms have refinanced $40bn from the bank market.

The figures show private credit continuing to gain market share, even in a year where the banks have been on the front foot regarding a number of big transactions. And where borrowers have turned from private credit to the banks, they are securing spread reductions almost as large as 300bps.

We’ve seen a few examples of banks being favored in recent weeks. K2 Insurance has been seeking to refinance with banks, aiming to capitalize on potential interest savings with a price talk at SOFR+375bps. That would be significantly down on the margin of the company’s existing private credit facility which stands at SOFR+675bps, 9fin’s BDC database shows.

Vista-backed Alegeus Technologies is too in the market looking to refinance a $525m TLB at a spread between SOFR+500bps-525bps, down from 825bps, according to the 9fin BDC database.

We’ve explored the popularity of borrowers going down the bank route in previous articles on repricing this year. Such a pivot to the BSL market for many borrowers has been prompted by sponsors being highly focused on costs as rates remain elevated. 300bps can certainly move the needle.

However, it is not all about cutting costs as private credit continues to find opportunities to refinance loans from the bank market. Recently, HPS funded Littlejohn-backed playground equipment manufacturer PlayPower with a $400m facility, luring the company over from the bank market. 9fin also reported on United States Infrastructure Corporation looking to refinance roughly $1.5bn in debt through private credit.

The devil you know

For other companies, however, refinancing is not about shifting from the bank to the non-bank market and vice versa. Some borrowers who have had a taste of private credit are sticking with it.

In the last week, 9fin reported that JP Morgan served as an admin agent on a $2bn refinancing to Stone Point-backed HR software company Vensure.

Publicly-listed GoHealth, a health insurance marketplace company, is also in the market for a private refinancing, looking to shave around 100bps of its current interest load. Its term loan is priced at SOFR+750bps and its revolver is priced at SOFR+650bps.

It’s said a lot that the markets are more complementary than competitive, that there is indeed space for both banks and non-banks. But even with elevated rates in recent years, private credit continues it long march to dominance.

And they’ve been further helped by the Fed. The recent 50bps rate cut is leaving private credit lenders hopeful more opportunities are coming their way.

Miami bound

Already missing the summer? Tiring of the fall weather?

Then perhaps you’ll want to take the opportunity to get yourself down to Miami on 21 October for Private Credit Connect: East. 9fin’s very own Peter Benson and Shubham Saharan will be attending what will be a full day of talking all things private credit.

For more details on the event and if you want to register click here. And if you see either Peter or Shubham on your travels, feel free to say hi.