(Bloomberg) — Direct lenders are working on a roughly $5 billion unitranche loan to partially finance a private equity consortium’s refreshed leveraged buyout offer for Zendesk Inc., according to people with knowledge of the matter.
A loan of that size would set a record for biggest private-credit deal. HPS Investment Partners is among lenders that may participate, said the people, who asked not to be identified discussing a private matter. Terms of the loan, including its size, haven’t been finalized and could still change.
Zendesk’s stock closed Tuesday at $116.80, giving the company a market capitalization of $14.2 billion.
Zendesk, an enterprise software company, last month fielded a takeover offer from private equity firms including Hellman & Friedman, Advent International Corp. and Permira Advisers, people familiar with the matter told Bloomberg News. Zendesk said it had received and rejected an unsolicited proposal from private equity firms that valued it at $127 to $132 a share.
A Permira spokesperson didn’t immediately respond to a request for comment. Representatives for Hellman & Friedman, Advent and HPS declined to comment. A Zendesk representative wasn’t immediately available for comment.
The decision by the consortium to solicit financing from direct lenders means they can borrow more than they’d be able to in the high-yield bond or leveraged-loan markets. Banks that arrange syndicated loans don’t typically underwrite deals that give borrowers debt loads of eight times a gauge of earnings called Ebitda, in part because they don’t want to run afoul of regulators.
In December, Apollo Global Management agreed to lend SoftBank Group Corp. $4 billion, the current record for a private-lender deal. That broke the $2.6 billion private loan that helped finance Thoma Bravo’s buyout of Stamps.com, and another $2.6 billion unitranche that was part of a broader $3.4 billion debt financing provided to Galway Insurance to fund in part its takeover of MAI Capital Management.
(Updates with Hellman & Friedman declining to comment in fifth paragraph.)
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