Baker Tilly wanted to do what a lot of companies do when borrowing gets expensive: wipe out old debt, take out a fresh loan, and catch a break on interest. The accounting firm, backed by private-equity investors Hellman & Friedman and Valeas Capital Partners, has now scrapped the whole idea.
The plan was to replace existing borrowing from direct lenders with a leveraged loan, which is a loan made to companies that already carry a lot of debt. It had two goals: lower the firm's interest costs and fund a dividend.
A Baker Tilly spokesperson said the firm "evaluated an opportunistic refinancing but decided not to proceed after considering a variety of market and economic factors," and could try again once market conditions improve.
Baker Tilly pitched the deal to investors last month. Not everyone liked the terms.
One person familiar with the talks, speaking on condition of anonymity because the discussions were private, said some investors wanted higher interest payments on the loan (a wider spread, in market terms) than the deal offered.
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The wider the spread, the more a borrower pays. That math is what killed the deal.
Baker Tilly was not willing to pay. Other borrowers are hitting the same wall.
Lately, some struggling tech and software companies have been forced to pay more and accept terms that favor investors when they refinance. Even a healthier borrower can feel that chill, as Baker Tilly just did.
Baker Tilly had reasons for wanting this deal. The firm has used debt to finance acquisitions in the past, and with forecasts calling for interest rates to remain elevated for an extended period and many junk-rated companies facing maturing debt, the firm sought to lower its borrowing costs.
Junk-rated is Wall Street shorthand for a below-investment-grade credit rating, which simply means the borrower is viewed as riskier than blue-chip companies.
If the financing had gone through, the dividend alone would have been a standout in this corner of the market.
The proposed package would also have been Baker Tilly's first U.S. leveraged-loan deal since the accounting firm was acquired by Hellman & Friedman and Valeas in February 2024. The firm had kept its borrowing with direct lenders before the proposed package.
Now the deal is off, and the people who would have organized it are staying quiet. Deutsche Bank, which had been chosen to arrange the financing, did not promptly respond to a request for comment, and representatives of both owners declined to comment.
For most investors, this story is less about one accounting firm and more about the mood of the lending market. When lenders walk away from a deal this size, it is a sign they want more money for the risk they are taking.
That matters because borrowing costs ripple through the whole economy. Companies that need cash will have to pay more for it, and those costs can work their way into the prices of bonds, bond funds, and even stocks.
None of this suggests the credit market is on the verge of a breakdown. It just means lenders are demanding more for their money, and when borrowing gets more expensive, the effect eventually shows up in your portfolio.
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