People familiar with the matter, who spoke on condition of anonymity as the talks are confidential, said Barclays intends to revise specific terms and later offer the loan again to syndicated investors.
This development follows shortly after a banking group headed by Barclays withdrew a $500 million loan for Shutterfly LLC from syndication, eventually arranging it with a private credit provider.
These unsuccessful syndications differ from the generally robust demand among investors for high-risk U.S. corporate loans. Many companies have succeeded in reducing borrowing expenses and speeding up timelines for transactions aimed at refinancing or funding acquisitions.
Neither a Barclays spokesperson nor representatives of Sound Inpatient Physicians or its private equity owner Summit Partners offered a comment.
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The proceeds of the Sound Inpatient Physicians loan were meant to refinance existing debt, following a 2024 pact with private credit providers. The deal featured borrower-friendly safeguards, such as limitations on the company's capacity to pay off the debt within the first twelve months. Additionally, the terms mandated that Sound Inpatient Physicians pay back 2.5% of the loan each year for the initial two years, then 5% annually after that.
S&P Global Ratings gave the company's planned debt offering a B- speculative-grade rating, which is six tiers under investment grade. The ratings agency anticipates that Sound Inpatient Physicians will grow its revenue over the course of this year, S&P stated in a recent report.
Moody's Ratings also raised the company's rating to B3 from Caa1, citing that the leveraged loan would streamline the capital structure and lengthen debt maturity, according to a June report.
The withdrawal underscores the occasional friction between traditional syndicated loan markets and the growing private credit sector, which has been capturing an increasing share of middle-market financing. While institutional investors have been generally receptive to leveraged loans, certain deals - especially those in sectors facing regulatory or reimbursement pressures like hospital staffing - can face heightened scrutiny. Sound Inpatient Physicians operates in a field that has seen consolidation and margin pressure, factors that may have contributed to investor hesitation despite the attractive interest rate.
The company manages hospitalist and emergency medicine programs across the United States. Its business model relies heavily on contracts with hospitals, which themselves are grappling with rising labor costs and shifting payer mixes. These underlying industry headwinds may have amplified investor caution, even as the loan's interest rate premium appeared generous relative to other recent leveraged loan offerings.
Private credit lenders, meanwhile, have been eager to fill gaps left by traditional banks, often offering faster execution and more flexible terms. The failed syndication of both the Sound Inpatient and Shutterfly loans highlights a growing bifurcation in the corporate debt market, where riskier or more complex deals increasingly bypass public syndication and move directly to direct lenders.
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