KORE Wireless deal sees big cut in first lien leverage

Atlanta-based KORE Wireless has refinanced its outstanding broadly syndicated debt of $300 million. According to its statement, it has received a $185 million five-year loan from Whitehorse Capital and a $150 million strategic investment from firms advised by Searchlight Capital Partners.

Whitehorse Capital, the credit arm of HIG Capital, will receive interest of SOFR plus 650 basis points. This represents a considerable reduction in first lien leverage, down from 5.2x to 3.2x trailing 12-month adjusted EBITDA.

The deal reflects a broad trend of refinancings in US mid-market businesses: the business want to refinance debt they acquired via broadly syndicated loans but rather than turn back to the BSL market or regulated banks to do so, they turn to private credit.

“Banks of course realise that private credit has moved in on much of their traditional fee-generating work, and they are pushing back,” said Michael Moore, managing director at Union Square Advisors in New York, in a recent interview on this pattern. “That is why earlier this year, as Bloomberg reported, JPMorgan was looking for a partner to grow its own private credit business.”

Moore worked at Citi for 14 years, beginning in European securitisation in London and later taking on various roles in capital markets. Their most recent position at Citi was in leverage finance in New York.

He added: “The theme of 2022 was that private credit stepped in and served as the backdrop for the BSL market as the BSL market slowed considerably. In 2023, private credit stepped in and also served as the backstop for the bank market in response to the regional banking crisis. This has now continued.”

He noted that the refinancing of KORE Wireless, an ‘internet of things’ company, is a good example of this trend.

Another example comes from a LevFin Insights report that noted Zep, a company specialising in home and office cleaning solutions, exited the institutional debt market through a private credit deal. The deal involved a $220 million first lien loan and a $125 million second lien loan, with Goldman Sachs Asset Management and Charlesbank providing the respective loans.