If you can swap a higher rate for a lower one, you do it. Mercer Advisors Inc., a private equity-owned wealth manager, is doing exactly that by lining up a $1.65 billion leveraged loan to replace about $1.6 billion of existing private-credit debt, according to someone familiar with the transaction. The goal is simple: bring down borrowing costs and free up cash.
The pricing, finalized on Thursday, sets the seven-year loan at a margin of 2.75 percentage points above the floating-rate benchmark, and it was priced at 99.75 cents on the dollar. There is also a $250 million delayed-draw term loan earmarked for acquisitions and other investments, the person said.
Regulatory filings list the lenders as KKR & Co.; Ares Management Corp.; BlackRock Inc.; plus vehicles run by Apollo Global Management Inc., among them a MidCap Financial fund. The pricing on that private-credit facility is set at a spread 4.5 percentage points above the benchmark. By refinancing, the spread shrinks by 1.75 percentage points, which is expected to save about $29 million per year.
Mercer, stewarding roughly $111 billion in client assets, cast the step as part of its evolution. "This refinancing is a natural next step for us," said chief financial officer Gün Keresteci, adding that the lower cost gives the firm more flexibility to serve clients. Spokespeople for Oak Hill Capital, Mercer's private equity owner, and for Goldman Sachs Group Inc., the lead on the refinancing, declined to comment.
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This year, more leveraged borrowers are swapping private credit for broadly syndicated loans instead of the reverse. Data published Thursday by JPMorgan Chase & Co. and KBRA DLD show $19.5 billion has moved from private credit into the syndicated loan market, compared with $9.2 billion going the other way. As DC Advisory managing director Michael Moore put it, "If borrowers have the ability to access the broadly syndicated market today and it's not a complicated financing, they are probably going to favor that market because it's strictly a cost of capital conversation and they can save more in that market."
Cheaper funding can translate into more cash for growth, M&A, or client service - and that can ripple into steadier businesses and, over time, potentially steadier returns. The takeaway is not a trade to place today, but a trend to watch: as long as syndicated loans undercut private credit on pricing, expect more companies to follow Mercer's playbook.
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