After two years of rising interest costs hindering asset sales, owners are seizing on recent rate stability to push for portability to get deals done. Keeping the existing loan package in place removes the need for any new buyer to find financing, making the purchase a lot more alluring.
"The market has pivoted to include a portability feature," said Bill Eckmann, head of principal finance in the Americas and senior managing director at Macquarie Capital. "We're seeing more of this because sponsors are looking at near-term maturities and thinking about their exits."
For direct lenders facing rising competition in a market that's tripled to $1.6 trillion since 2015, portability provisions allow them to stay invested in assets they've already vetted and endorsed.
"If you've found an attractive business then you may be willing to let the debt travel to another owner," said Jon Bock, senior managing director at Blackstone Credit. "From a self-selection standpoint, this is an opportunity for managers to extend the lives of the loan."
Often reserved for strong businesses, portability can avoid the need for a loan to be refinanced in the broadly syndicated market or by a competitor.
While data showing the total amount of debt with portability features is hard to come by, such provisions are clearly becoming more commonplace.
Veritas Capital, for example, sold its consulting business, Guidehouse, to Bain Capital Private Equity and the company's $3.1 billion loan package was transferred over. A group of private credit lenders sweetened the terms of their portable facility to entice Bain to keep it in place, rather than risk the chance of losing the loan to a refinancing by banks.
Antares Capital recently led a $1.2 billion portable loan facility to BC Partners' NAVEX Global, a company the private equity firm has owned since 2018. The proceeds were used to support a dividend recapitalization.
As part of a loan increase provided to AWP Safety last year for add-on acquisitions, direct lenders agreed to AWP owner Kohlberg & Co.'s request for a portability provision, according to a person familiar with the matter. The business has been owned by Kohlberg since 2020.
Kohlberg declined to comment. AWP didn't respond to a request for comment.
Sponsors recognize the benefits to maintaining loan terms or leverage levels that were given in an era of cheap money and are often unavailable now.
"In some transactions, portability is quite valuable to sponsors because it removes market risk both in terms of leverage and pricing," said Salman Mukhtar, a managing director at Barings. "It's a powerful tool in terms of getting leverage and terms that might not be supported by the market in the future."
In a $2.25 billion refinancing last year for Enverus, the debt was made portable by lenders Hellman & Friedman and Genstar Capital, an investor in the business since 2018.
