Direct lenders are expected to take the keys to educational software company Pluralsight, which Vista Equity Partners has owned since 2021.
Blue Owl, the agent on the financing, and a group of other lenders including Ares, Goldman Sachs, Benefit Street Partners, BlackRock, Oaktree, and Golub Capital will work together on a restructuring.
“We’re working with the group to put a restructuring in place where lenders will obviously reduce debt and take control of the company,” said Ares Credit Group head and CEO of Ares Capital Corporation, Kipp deVeer, on the BDC’s July 30 earnings call.
Ares Capital Corporation marked its Pluralsight position down to 48 cents on the dollar as of June 30, placing the investment on non-accrual status. The first-lien loan’s principal value of $106.2 million was marked down to a fair value of $51.0 million.
“It’s an unfortunate situation. But like other ones, we’ll go in and fix it and move on,” said deVeer.
Earlier this summer, struggles came into focus for Pluralsight after Vista Equity raised preferred equity financing through a drop-down transaction and marked its equity position in the company down to zero.
The transaction raised questions about liability management exercises taking root in the world of private credit, which could hamper lender recoveries.
However, on its earnings call, Ares pushed back on these fears, saying that the lenders did have document protections, and noted that the situation would not work out well for Vista.
“The document protection has actually worked pretty darn well in that transaction as well,” added co-head of Ares US direct lending, Kurt Schnabel.
The alternative asset manager said liability management transactions are not something “really present” in its portfolio.
“We don’t view them as generally a risk to our middle-market borrowers,” said deVeer.
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