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Is Pluralsight the Proverbial "Canary in the Mine" of Liability Management Exercises ("LMEs") in Private Credit?
Ian K. Walker, J.D. - Head of Legal Innovation, Covenant Review
Overview
According to reports in LevFin Insights and the financial press, US-based Vista Equity Partners (“Vista”) recently made a $50 million capital injection into Pluralsight, Inc. (“Pluralsight”), one of its portfolio companies.12 The proceeds were reportedly used to fund an interest payment on Pluralsight’s ~$1.5b private credit term loan. Pluralsight was unable to make the interest payments due to escalating interest rates, which also saw Vista write off the entire value of their equity investment.
The capital injection was reportedly made by way of a loan from Vista to a newly formed non-guarantor subsidiary of Pluralsight, which then upstreamed an unspecified amount of the proceeds to Pluralsight. This new loan was secured by intellectual property assets originally pledged to the term loan lenders. The company reportedly transferred the assets from one or more guarantors of the ~$1.5b term loan to the newly formed non-guarantor subsidiary.
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