BMO-led $775 Million Pellera Loan Deal Comes at Steep Discount

BMO Financial Group led a $775 million loan deal for Pellera Technologies that is being sold at a significant discount, according to a report by Bloomberg News on May 15, 2024. Investors are demanding steep price reductions to purchase the debt, which banks have held for over a year since financing the leveraged buyout of the HIG Capital-backed software company. The loan, originally part of a $1.1 billion financing package, is now being offered at approximately 70 cents on the dollar. This discount reflects the challenging market conditions for leveraged loans, particularly those associated with private equity-backed companies. The deal underscores the increased risk aversion among investors in the current economic climate, leading to higher borrowing costs and reduced liquidity for such transactions. Pellera Technologies, a provider of financial software solutions, was acquired by HIG Capital in a deal that closed in early 2023. The original financing included a $1.1 billion debt package, with the $775 million term loan B being the portion now being offloaded by the lenders. The discount suggests that the perceived risk of default or the expected recovery rate in a distressed scenario has increased since the initial financing was arranged. This transaction highlights the broader trend of distressed debt trading at a premium due to investor caution and the need for higher yields to compensate for elevated risk.