Thoma Bravo offers lenders more protections in Sophos refinancing

Thoma Bravo is offering lenders a fresh package of protections as it seeks to refinance cybersecurity company Sophos, highlighting the growing pressure on PE sponsors to reassure creditors as artificial intelligence reshapes the software sector, according to a report by Bloomberg.

The report cites unnamed people familiar with the matter as saying that the proposed refinancing includes several provisions designed to strengthen the position of existing lenders. Among them is an “omniblocker”, which broadly restricts a company from giving preferential terms to selected creditors in ways that could disadvantage others.

Sophos has also agreed to measures intended to prevent existing debt holders from being subordinated and to restrict the movement of assets, including intellectual property, away from lenders, the people said.

The concessions come as Thoma Bravo works to refinance a $2.1bn loan due in March 2027. The sponsor has faced a cautious lending market amid concerns that AI could disrupt established software businesses, although recent signs suggest some of those concerns may be easing.

The Sophos situation is being closely watched because Thoma Bravo has almost $9bn of software-related debt maturities coming due over the next two years, more than any of its private equity peers. The firm recently agreed to roughly 40 lender-friendly amendments as part of a refinancing for another cybersecurity investment, Proofpoint.

The proposed Sophos financing comprises a roughly $1.67bn loan priced at 5 to 5.25 percentage points over benchmark rates and offered at 97 cents on the dollar, alongside a €350m loan.

A further $300m privately placed junior payment-in-kind instrument, together with $98m of cash on Sophos’ balance sheet, is intended to reduce the company’s overall leverage.

Thoma Bravo is also seeking to move ahead with refinancing its portfolio companies before other private equity sponsors begin addressing their own approaching debt maturities, according to one of the people.

Sophos has added several provisions that reflect the increasingly familiar language of the leveraged credit market. A so-called Serta blocker is designed to prevent non-pro-rata debt exchanges that could move certain lenders down the repayment hierarchy, while a Pluralsight blocker seeks to prevent the transfer of assets such as intellectual property to facilitate new borrowing outside the existing lender group.

The provisions take their names from high-profile debt restructurings involving Serta Simmons Bedding and Pluralsight, respectively, and are part of a broader set of protections that lenders have increasingly sought as liability-management transactions have become more common.

Thoma Bravo has not undertaken a liability-management exercise, according to people familiar with the matter.