Vista, Blackstone Seek $3.2 Billion Private Debt for Smartsheet

(Bloomberg) -- Vista Equity Partners and Blackstone Inc. are asking private credit lenders for a $3.2 billion debt package to support their proposed acquisition of software maker Smartsheet Inc., according to people with knowledge of the matter.

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The private equity firms have reached out to direct lenders for a $2.9 billion recurring revenue loan and a $300 million revolving credit facility, the people said, asking not to be named discussing a private transaction.

It’s the first large debt-funded acquisition to hit the private credit arena following the US Labor Day holiday earlier this month. Acquisitions and leveraged buyouts typically make up a significant amount of direct lending deal flow, but high interest rates and low company valuations dampened this activity. Market participants are eagerly waiting for the Federal Reserve to begin cutting interest rates next week, which could jump start new acquisitions.

Discussions for the Smartsheet debt package are in early stages and details could change, the people added. Discussions regarding the proposed acquisition are also ongoing, they said.

Representatives for Vista and Blackstone declined to comment. A representative for Smartsheet didn’t immediately respond to requests for comment.

Typically, lenders decide how much debt to let a company borrow based on the earnings that firm generates. But in cases where the company is rapidly growing but not yet generating enough earnings, some lenders will instead base the transaction on recurring revenue.

Vista and Blackstone have asked for pricing of 6.25 to 6.5 percentage points over the Secured Overnight Financing Rate, with the ability to pay-in-kind for up to half of the margin, meaning the company could pay some of the interest with more debt, the people said. After the company generates enough positive earnings to flip into a standard earnings-based loan, the pricing would change to 5.75 percentage points over SOFR, they added.

Smartsheet has a market capitalization of about $7 billion. The private equity firms are part of a group in talks to acquire the workplace software maker, Reuters reported on Sept. 5.

--With assistance from Michelle F. Davis.

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