Blackstone Inc.-backed Ancestry.com Inc. is adding stronger protections for lenders on a $1.75 billion loan sale as part of a debt-refinancing effort, aiming to secure investor approval.
The genealogy and DNA-testing firm is revising its loan documentation to include provisions that limit its ability to shift cash beyond the reach of creditors, according to individuals familiar with the discussions who requested anonymity because they are not permitted to speak publicly.
These adjustments highlight how investors are becoming more demanding when dealing with higher-risk companies that are trying to refinance existing obligations. This shift comes as more than $245 billion in leveraged loans are scheduled to mature by 2028, according to Bloomberg-compiled data.
Ancestry.com initially began marketing a five-year term loan as well as a $500 million high-yield bond last week. The proceeds are intended to pay off debt that matures next year, which was originally borrowed to finance the 2020 acquisition by Blackstone. Both securities are expected to be priced on Wednesday.
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Early Wednesday, pricing guidance for the loan shifted to the wider end of initial discussions, and according to some sources, the bond might now offer returns approaching 9%.
The revised documentation includes changes to the rules surrounding cash distributions and mandates that the company apply excess cash flow toward debt repayment, the sources added. Additionally, the revised terms lower the threshold for pre-existing debts that could delay the acceleration of the new loan's maturity.
Bank of America Corp. is the lead arranger for these debt offerings, while Arches Buyer Inc. serves as the issuer. The lender and Blackstone both declined to comment, while Arches did not immediately respond to inquiries.
The company is also offering a $251 million revolving credit facility, according to S&P Global Ratings, which issued commentary recently following the announcement of the bond and loan offerings.
The broader context for these refinancing moves is the looming wall of maturities facing the leveraged loan market. For investors, this creates an opportunity to demand better terms and higher yields, especially from firms like Ancestry.com that carry significant debt loads. The company's willingness to revise its loan covenants signals that lenders are gaining leverage in negotiations, a trend that could persist as more refinancing deals hit the market.
The refinancing effort also underscores the specific challenges facing private-equity-backed companies. Ancestry.com was taken private by Blackstone in 2020, funded in part by leveraged loans. With interest rates now higher and credit conditions tighter, the company must secure new terms to avoid default or forced restructuring - a pressure that is becoming common across the leveraged loan landscape.
By offering additional protections and potentially higher returns, Ancestry.com is attempting to navigate a cautious credit environment while ensuring it can meet its upcoming debt obligations without disruption.
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