GIVEAWAY | PLURALSIGHT DEEP DIVE THE FIRST PRIVATE CREDIT RESTRUCTURING

So many of you asked to remove paywall, so now you can get it for free! Pluralsight is called the Restructuring Deal of 2024 and represents a cocktail of restructuring, private equity, and private credit.

You have to understand it.

To Get the Full Deep Dive for Free, link below

This is why this is a big deal:

1) It is a beautiful case of how leverage can lead to big troubles for private equity backed-companies even if the company keeps performing (see image below)

2) It is the first liability management exercise done against private credit lenders

3) Makes you understand the way distressed companies decide which restructuring alternative is the best value accretive The full writeup is behind paywall on the Pari Passu Newsletter Website, but today you can get it for free!

If you want to get the full writeup - link below

WHY THIS IS A BIG DEAL: While the liabilities management exercises landscape is constantly evolving, there is one thing that has always been constant about these maneuvers: they all involve public debt.

That was at least true until earlier this year, when Pluralsight, a company that was taken private in 2021 by Vista Equity Partners, engaged in a drop-down maneuver that involved stripping assets from private credit lenders. Let's see a small preview -→

BACKGROUND:  In early 2021, Vista agreed to purchase Pluralsight in a take-private deal for $22.50 per share and an estimated value of $3.5bn. This transaction included $1.5bn of debt financing (~40% LTV), with over $1bn coming from direct lenders ($1.175bn recurring revenue term loan and a $100mm revolver) for an implied $2bn equity check. HOW DID IT GET INTO TROUBLE: When Vista Partners Bought out Pluralsight, it was reported that the company was generating $390mm in annual recurring revenue.

Assuming a 10% CAGR, this leads to $472mm of ARR in 2023. In 2023, it was reported that Pluralsight had a 26% EBITDA margin, meaning it would generate $123mm in annual EBITDA. It was estimated that the private credit debt had an interest rate of SOFR + 800. The remaining $325mm was not issued by private lenders. The specific interest rates on those pieces of debt were not publicly disclosed. Assuming the public loan rates were 200bps cheaper than the private credit rates (SOFR + 600), the interest expense on the old debt is $37mm (325mm of debt * 11.5%). This total interest expense would be $196mm given these assumptions.

RESTRUCTURING:  Pluralsight engaged in a dropdown maneuver, where it moved its IP (a substantial portion of the company's total asset value) to an entity sitting inside the company's restricted group. A lot more on this in the full write-up.

PRIVATE CREDIT CONSEQUENCES: This is where it gets really interesting as there are clashing views…