Private Credit Risks Losing to Banks in Cotiviti’s Buyout Financing



(Bloomberg) — The buyout of Cotiviti Inc. is back, and this time banks including JPMorgan Chase & Co. have a good chance of leading the financing.

KKR & Co. is looking to buy a 50% stake in the healthcare data analytics company and plans to back its bid with about $5 billion to $6 billion of debt. It’s looking at options including getting private credit loans or more conventional leveraged financing from banks, according to people with knowledge of the matter.

Earlier this year, Carlyle Group Inc. tried to buy the same stake with a similar amount of debt, before abandoning the deal. Private credit firms were expected to win the financing in that case.

But now banks offering more widely held debt, including syndicated loans and junk bonds, look positioned to win the financing, said the people, who asked not to be named discussing a private transaction. Funding with syndicated loans and junk bonds is generally materially cheaper than private credit now.

In the loan market, pricing could be somewhere in the range of the Secured Overnight Financing Rate plus 4 to 5 percentage points, while in the private market that margin could be somewhere between 5.25 and 5.5 percentage points, the people said.

The shift is a sign of how much debt markets have recovered this year. Banks have offloaded most of the $40 billion of buyout debt that had been stuck on their books, giving them greater capacity to lead financings. And US leveraged loans have gained about 12% in 2023, while yields have dropped, as the Federal Reserve has signaled that it’s definitively stopped hiking and increasingly thinking about cutting rates.

“We’ve seen the broadly syndicated market come in pretty aggressively on pricing and terms, said Marc Chowrimootoo, managing director for private credit at Hayfin Capital Management, speaking about the market in general. “We don’t want to be chasing really hotly contested syndicated deals that hurt our return profile.”

KKR would be buying the stake from Veritas Capital, which took Cotiviti private in 2018. They haven’t agreed to any deal yet, and may never do so. The particulars of any financing are also still in flux. A spokesperson for KKR declined to comment.

Among the private credit lenders that are in talks to participate in the financing are Blackstone Inc., HPS Investment Partners, Blue Owl Capital Inc. and Goldman Sachs Group Inc.’s asset management arm, according to the people with knowledge of the matter. KKR is asking the private lenders to allow it to delay 100% of its interest payments, known as a payment-in-kind feature, to sweeten the financing for the company. For Carlyle’s deal, private lenders were only planning to allow half the interest to be delayed. Any bank financing is expected to require all of the interest be paid in cash.

“Both markets have their virtue,” said Leland Hart, a partner at Warwick Capital Partners who focuses on performing credit, without commenting specifically on Cotiviti. “But it makes sense to tap the syndicated markets now.”

KKR is only planning to value the stake at $10 billion to $11 billion including debt, compared with Carlyle’s abandoned offer of around $15 billion, Bloomberg previously reported. Meanwhile, the expected size of the debt is about the same for each of the deals. That means the newer deal will offer less equity cushioning to absorb losses for lenders.

But Cotiviti generates relatively stable income, which as long as it holds can make balance sheet metrics less important. Earnings before interest, taxes, depreciation, and amortization — a key measure of profitability — remains steady from earlier in the year at around $900 million, according to one of the people.

Representatives for JPMorgan, Blackstone, Blue Owl, Goldman Sachs and HPS declined to comment. Veritas and Cotiviti did not respond to requests for comment.


  • Singapore’s Temasek Holdings Pte and KKR have joined a loan of around A$950 million for Silver Lake Management’s TEG Pty
  • Vedanta clinched a $1.25 billion credit facility and is asking investors to extend the due dates on $3.2 billion of dollar bonds in exchange for an up-front cash payment
  • Lenders led by Blackstone sweetened terms on around $3 billion of Guidehouse Inc.’s existing debt ahead of the company’s sale to Bain Capital Private Equity, a maneuver that successfully held off banks vying to finance the buyout
  • Barings led a $410 million term loan for Beacon Mobility in September with proceeds used to fund an acquisition, pay down some existing debt and put cash back on the balance sheet
  • TPG Inc. is nearing a deal to acquire UK special educational needs provider Outcomes First Group and has been discussing partly funding the deal through a £350 million unitranche loan
  • Golub Capital led an incremental unitranche financing increase to $330 million for MRI Software
  • Blackstone is leading a €950 million loan package to back Permira’s buyout of Gossler, Gobert & Wolters
  • Golub is leading a lender group putting together a more than $2 billion debt package to refinance all the existing debt of software firm Aptean Inc.
  • Oak Hill Advisors is leading a $375 million direct loan to Greenway Health, as the company’s private equity owner turns to the private credit market to refinance debt previously arranged by banks
  • Adams Street Partners served as lead arranger on a $350 million unitranche to Synamedia, the Permira-backed video technology provider
  • MC Credit Partners led a $315 million financing to support the acquisition of wireless communications and security technologies company BearCom by private equity firm Siris Capital


  • Mubadala Investment Co. and Ares Management Corp. said they will partner with Aldar Properties on a $1 billion private credit fund to invest in real estate across the UK and Europe
  • AustralianSuper is increasing exposure to the fast-growing private credit market to boost returns amid shrinking bank balance sheets and tightening regulation
  • A record number of Japanese investors are putting their money into domestic private credit deals in search of higher returns in the world’s last major holdout for negative interest rates
  • Almost half of private markets investors plan to increase their target allocations to the $1.6 trillion private credit market, according to a survey from alternative asset manager Coller Capital
  • Blackstone has provided a more than $1 billion private credit loan package for BeyondTrust, a cybersecurity company, according to people with knowledge of the transaction

Job Moves

  • Strategic Value Partners has hired Timo Koch from Avenue Capital Group as its European co-head of structured capital
  • HSBC has hired Boomish Gopalakrishnan as director of private credit to lead the bank’s private credit business in ASEAN and India
  • Goldman Sachs’s asset management arm is reshuffling senior executives in its $110 billion private credit unit as it seeks to double the size of the business in the medium term
  • LCM Partners, a private credit-focused asset manager, has appointed Julian Schiller as managing director and head of capital solutions


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