Mercer Advisors Swaps $1.6B of Private Credit for Cheaper Bank Loan, Saving $29M a Year

Mercer Advisors, a wealth management company backed by private equity, is seeking to lower its financing costs by replacing its existing debt with a $1.65 billion leveraged loan, adding to a growing number of companies turning to the syndicated bank-loan market for cheaper funding.

The company, which has approximately $111 billion in client assets, priced the seven-year loan Thursday at 2.75 percentage points above the floating-rate benchmark and 99.75 cents on the dollar, a source familiar with the transaction told Bloomberg.

The refinancing also includes a $250 million delayed-draw term loan that the firm plans to use for acquisitions and other investments. The transaction will reduce the company’s borrowing spread by 1.75 percentage points, or approximately $29 million in annual interest savings.

Oak Hill Capital and Goldman Sachs Group led the refinancing, Bloomberg noted.

"This refinancing is a natural next step for us," Mercer Chief Financial Officer Gün Keresteci said, adding that the lower financing costs will provide the company with greater flexibility to support its clients.

Mercer plans to use the financing to repay approximately $1.6 billion of debt held by private credit lenders, Bloomberg added. The existing debt carries an interest of 4.5 percentage points above the benchmark and is held by lenders including KKR & Co., Ares Management Corp, BlackRock Inc., and Apollo Global Management-managed funds, including one operated by MidCap Financial, regulatory filings revealed.

Growing concerns around private credit have recently prompted some borrowers to return to the syndicated loan market, where financing costs are lower despite banks pushing highly leveraged companies to reduce their debt.

So far this year, $19.5 billion of private credit debt has been moved into the syndicated loan market, more than twice the $9.2 billion that has been refinanced into private credit, data from JPMorgan Chase & Co. and KBRA DLD noted.

For the below investment-grade borrowers, syndicated loans are approximately 200 basis points cheaper than direct lending, two senior bank lenders told Reuters in May. The pricing gap is large enough to make refinancing through the syndicated market attractive, with some borrowers already making the switch and others considering it, the bankers added.

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