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Revelle Capital

Transaction Type

Refinancing Existing Debt with Private Credit

Proactive refinancing solutions for businesses facing maturity walls, restrictive covenants, or suboptimal capital structures - transitioning from bank debt to flexible private credit with improved terms and reduced execution risk.

300+Lenders
15+Years Experience
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What Is Refinancing via Private Credit?

Refinancing through private credit refers to the replacement of a borrower's existing debt facilities - whether bank loans, syndicated credit facilities, high-yield bonds, or legacy private credit arrangements - with new debt provided by direct lending funds or other non-bank capital providers. Unlike an acquisition financing where the debt funds a new transaction, a refinancing restructures the liability side of an existing business without changing ownership. The motivations for refinancing are diverse: approaching maturity dates that create balance sheet pressure, restrictive covenant packages that constrain operational flexibility, margin levels that no longer reflect the borrower's improved credit profile, or a fundamental mismatch between the existing debt structure and the business's current strategic direction.

The transition from bank lending to private credit has become one of the most significant refinancing themes in the European mid-market. As Basel III and IV capital requirements have progressively constrained bank appetite for leveraged lending - particularly for credits with leverage above 4x EBITDA, limited amortisation, or covenant-lite structures - businesses that were historically well-served by their bank groups have found renewal discussions increasingly difficult. Banks may offer to renew facilities but at significantly tighter leverage, higher pricing, or with covenant packages that restrict the borrower's ability to pursue acquisitions, pay dividends, or invest in growth. Private credit provides an alternative that maintains or improves the leverage and flexibility the borrower requires, with the trade-off being a higher margin that reflects the single-lender, hold-to-maturity model and the certainty and flexibility embedded in the structure.

Maturity wall management is a primary driver of refinancing activity. When a significant volume of leveraged loans and high-yield bonds approach their maturity dates within a concentrated window, borrowers face the risk of being unable to refinance on acceptable terms - particularly if market conditions deteriorate or the borrower's credit profile has weakened since the original financing was arranged. Private credit lenders, with committed capital and flexible mandates, are well-positioned to provide refinancing solutions in these situations because they are not dependent on syndication markets, CLO demand, or bond market conditions. They can commit to a refinancing bilaterally, providing the borrower with certainty of execution regardless of broader market dynamics. The EUR 2026-2028 maturity wall in European leveraged finance - estimated at over EUR 200 billion of facilities approaching maturity - represents a structural tailwind for private credit refinancing activity.

Repricing and margin optimisation represent the other end of the refinancing spectrum. Borrowers whose credit profiles have improved - through deleveraging, EBITDA growth, or improved business quality - may find that their existing debt carries pricing that no longer reflects their risk profile. A refinancing process creates competitive tension among lenders, enabling the borrower to achieve a margin reduction, improve covenant headroom, increase permitted baskets, or extend tenor. In the current European market, repricing transactions represent approximately 25-30% of private credit refinancing volume, with the remainder split between maturity-driven refinancings, bank-to-private-credit transitions, and structural optimisation transactions where the borrower seeks to simplify a complex multi-tranche capital structure into a single unitranche facility with one set of covenants and one lender relationship.

When to Use This Structure

Refinancing through private credit is the appropriate solution when the existing debt structure no longer serves the borrower's needs and the private credit market offers a better combination of leverage, flexibility, pricing, and execution certainty than available bank or capital markets alternatives.

Approaching maturity on existing bank facilities or leveraged loans where the incumbent lender group has signalled reduced appetite for renewal at current terms - particularly where leverage exceeds the 4x EBITDA threshold that triggers regulatory scrutiny for bank lenders
Bank-to-private-credit transitions where the borrower's leverage, amortisation, or covenant requirements have moved beyond what regulated bank lenders will comfortably provide, and a single unitranche facility offers a simpler, more flexible structure
Margin optimisation for borrowers whose credit profile has improved materially since the existing financing was arranged - through EBITDA growth, deleveraging, or improved business quality - and the current pricing no longer reflects the risk
Covenant reset transactions where the existing covenant package is overly restrictive and constrains the borrower's ability to pursue acquisitions, capital expenditure, or strategic initiatives without requiring lender consent
Structural simplification where a complex multi-tranche capital structure (senior, second lien, mezzanine, revolving facility) can be consolidated into a single unitranche facility with one lender, one set of covenants, and one relationship to manage
Pre-emptive refinancing 12-18 months ahead of maturity to lock in favourable terms while the market is constructive, avoiding the execution risk of refinancing under time pressure when lenders know the maturity date is imminent
Situations where the incumbent bank group has fragmented through secondary trading and the borrower is dealing with unfamiliar CLO managers or distressed debt funds who purchased the loan at a discount and have different incentives than the original lenders
Refinancing to fund a step-up in leverage for a recapitalisation, special dividend, or to fund an identified acquisition pipeline without needing to run a separate financing process for each event

How It Works

The refinancing process through private credit is typically faster and less complex than an acquisition financing because the business is already operating, financial data is available, and the management team and sponsor are known quantities. Typical timelines run 4-8 weeks from initial lender engagement to drawdown and repayment of existing facilities.

1

Assessment and Capital Structure Review

The process begins with a comprehensive review of the existing capital structure, including current leverage, pricing, covenant utilisation, maturity profile, and any structural constraints. Revelle Capital analyses the borrower's current financial position, growth trajectory, and strategic plans to determine the optimal refinanced capital structure. Key decisions at this stage include whether to maintain the current leverage or step up, whether to consolidate multiple tranches into a single facility, and whether to address structural issues such as cross-currency mismatches, restrictive baskets, or burdensome reporting requirements. The existing facility documentation is reviewed to identify call protection provisions, prepayment mechanics, and any consent requirements that affect the refinancing timeline and economics.

2

Market Sounding and Lender Engagement

A credit memorandum is prepared and shared with 4-8 private credit lenders selected based on the borrower's sector, size, leverage profile, and specific refinancing requirements. The memorandum emphasises the refinancing rationale, the borrower's track record under the existing facility, covenant compliance history, and the proposed terms for the new facility. For repricing transactions, creating genuine competitive tension is critical - lenders must believe they are competing for an attractive credit, not rescuing a distressed borrower. The incumbent lender (if a private credit fund) may also be given the opportunity to match or improve upon competitive proposals. Indicative term sheets are typically received within 1-2 weeks of lender engagement.

3

Term Sheet Negotiation and Incumbent Management

Received term sheets are benchmarked against each other and against the existing facility terms. Key negotiation points in refinancing transactions include margin reduction relative to the existing facility, covenant headroom improvement, extension of tenor, reduction or elimination of amortisation, expansion of permitted acquisition and dividend baskets, and call protection on the new facility. Where the incumbent lender is a private credit fund, managing the relationship requires care - the borrower may owe call protection premiums or exit fees under the existing facility, and the timing of the refinancing relative to the call protection schedule can materially affect the economics. Once terms are agreed with the preferred lender, the transaction proceeds to credit committee for a committed offer.

4

Confirmatory Due Diligence

Due diligence for a refinancing is typically lighter than for an acquisition financing because the business is already operating under a leveraged capital structure and the lender can review the borrower's compliance track record. Financial due diligence focuses on confirming the current EBITDA run-rate, validating any adjustments or add-backs, and assessing the sustainability of recent performance trends. Legal due diligence reviews the existing facility documentation to identify any consent requirements, call protection provisions, or structural constraints that must be addressed. Commercial due diligence may be limited to a market update rather than a full scope review, particularly if recent third-party reports are available from the original financing or a subsequent amendment process.

5

Documentation and Existing Facility Discharge

New facility documentation is drafted, typically on a streamlined basis where the borrower and lender can leverage the existing documentation as a starting point for commercial terms while producing new-form documents for the incoming lender. Simultaneously, the borrower's legal counsel prepares the discharge and release documentation for the existing facilities, coordinating payoff letters from the outgoing lender group, security release deeds, and deregistration filings across all relevant jurisdictions. For bank-to-private-credit transitions, the coordination between incoming and outgoing lenders requires careful management to ensure seamless execution on the refinancing date.

6

Closing, Drawdown, and Repayment

On the refinancing completion date, the new private credit facility is drawn and the proceeds are applied directly to repay the existing facilities in full, including any accrued interest, prepayment premiums, and break costs. The existing security is released and new security is granted in favour of the incoming lender, either through reassignment of existing security or re-grant of new security documents depending on local law requirements. Conditions precedent mirror those of a new financing but with the additional requirement of satisfactory payoff letters and release documentation from the outgoing lender group. The entire process from signing to funding is typically completed in a single day with proper coordination, ensuring no gap in the borrower's access to financing.

Typical Terms

Refinancing terms through private credit reflect the reduced execution risk compared to new-money transactions (the business is a known quantity) balanced against the specific dynamics driving the refinancing. The ranges below represent current European mid-market conditions for refinancings of businesses with EUR 10-75M EBITDA.

Senior Leverage
4.0-5.5x EBITDA
Comparable to new-money transactions; repricing refinancings at the lower end, step-up refinancings at the higher end
Unitranche Pricing
EURIBOR/SONIA + 500-700 bps
Repricing transactions targeting 25-75 bps reduction from existing facility; bank-to-private-credit transitions at the higher end reflecting structural change
Margin Ratchets
2-3 step leverage-based ratchet
25-50 bps per step; rewards continued deleveraging and incentivises borrower to maintain credit discipline post-refinancing
Arrangement Fee
1.0-2.0% of facility
Typically lower than new-money transactions reflecting reduced due diligence scope and execution risk for a proven credit
Tenor
5-7 years
Bullet maturity extending the runway by 3-5 years beyond the existing facility maturity; tenor extension is often a primary refinancing motivation
Amortisation
0-1% p.a. (excess cash flow sweep)
ECF sweep of 50% above a leverage threshold, stepping down to 25% as leverage reduces; often improved from existing facility terms
Call Protection
101 in Year 1, par thereafter
Lighter than new-money transactions; borrowers with recent refinancing history negotiate for soft call only or no call protection
Covenant Package
1-2 springing or maintenance covenants
Covenant reset is a key refinancing objective; headroom typically improved to 30-40% over base case versus 20-25% in the existing facility
Permitted Acquisitions
EUR 5-15M individual, EUR 20-40M aggregate p.a.
Expanded baskets compared to existing facility; often a primary motivation for refinancing where the current facility is too restrictive
Prepayment of Existing Facility
Par or 101-102 if within call protection period
Timing the refinancing to coincide with call protection step-down can save 1-2% of facility size in breakage costs
Incremental Facility
Accordion of 1.0-1.5x EBITDA pre-approved
Pre-approved incremental capacity for future acquisitions without requiring a separate financing process; agreed at the time of refinancing
Transition Costs
EUR 200K-750K total (legal, advisory, breakage)
Existing facility breakage costs, new facility legal fees, and advisory fees; typically recovered within 6-18 months from margin savings on repricing transactions

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Private Credit vs Bank Lending

The choice between refinancing into a new private credit facility versus renewing with the incumbent bank group depends on the borrower's leverage profile, flexibility requirements, and the pricing differential relative to the value of structural improvements. The comparison below highlights the key trade-offs.

Private CreditvsBank Lending
Leverage Continuity
Private CreditMaintains or increases existing leverage levels without regulatory constraints. A borrower at 5x EBITDA can refinance at 5x or step up to 5.5x if the credit supports it. No regulatory leverage caps or guidelines limiting appetite.
Bank LendingBank renewal often comes with leverage reduction pressure. ECB and PRA leveraged lending guidelines create practical ceilings at 4-4.5x senior. Banks may decline renewal above these thresholds or impose punitive terms and conditions.
Covenant Flexibility
Private CreditCovenant reset to springing or covenant-lite structures with 30-40% headroom. Expanded permitted baskets for acquisitions, dividends, and capex. Documentation designed for the borrower's current business plan rather than inherited from prior facility.
Bank LendingBank renewal may tighten covenants from the original facility, particularly if the borrower has experienced any credit stress or covenant waivers during the existing facility life. Syndicate consent required for any material covenant changes.
Execution Certainty
Private CreditSingle lender provides committed refinancing without syndication risk. Not dependent on market conditions, CLO demand, or bond investor appetite. Bilateral negotiation and execution on a committed basis.
Bank LendingBank renewal requires consent from the existing syndicate. If the loan has traded in secondary markets, the borrower may face unfamiliar holders with different commercial incentives than the original lending group.
Pricing
Private CreditEURIBOR/SONIA + 500-700 bps for unitranche refinancing. Premium of 150-250 bps over bank renewal pricing but includes the value of leverage maintenance, covenant flexibility, and single-lender simplicity.
Bank LendingEURIBOR/SONIA + 300-450 bps for bank renewal. Lower headline cost but may come with leverage reduction, tighter covenants, and additional amortisation requirements that constrain operational flexibility and cash generation.
Tenor Extension
Private CreditNew 5-7 year bullet facility extending the maturity runway significantly. Clean break from existing facility with fresh documentation tailored to current circumstances and strategic plans.
Bank LendingBank renewal typically extends for 2-3 years with the possibility of further extensions. Shorter renewal periods create frequent refinancing events and associated costs, management distraction, and execution risk.
Structural Simplification
Private CreditMulti-tranche bank structures (term loan A, term loan B, revolving facility, capex facility) consolidated into a single unitranche with one set of terms. One lender, one covenant package, one reporting requirement, one decision-maker for amendments.
Bank LendingBank renewal maintains the existing multi-tranche structure with separate pricing, amortisation schedules, and potentially separate covenant packages for each tranche. Complexity accumulates over time as facilities are amended and extended.
Decision Timeline
Private Credit4-8 weeks from engagement to completion. Single credit committee approval. Committed term sheet without flex provisions or syndication contingencies.
Bank Lending6-12 weeks for a bank renewal process. Multiple committee approvals across the syndicate. Each bank in the group may have different internal timelines, risk appetites, and renewal requirements.
Maturity Wall Management
Private CreditPrivate credit lenders actively seek refinancing opportunities and can commit 12-18 months ahead of maturity, removing the overhang from the borrower's credit profile. Not affected by broader maturity wall dynamics in the syndicated market.
Bank LendingBank appetite for renewal may be constrained during periods of concentrated maturity walls when multiple borrowers are seeking refinancing simultaneously, reducing bank capacity and potentially increasing pricing across the market.

Who Provides Refinancing Through Private Credit?

The European private credit market for refinancing is served by the full spectrum of direct lending funds and credit platforms. Refinancing transactions are attractive to private credit lenders because they involve businesses with established operating track records, known management teams, and existing compliance histories - reducing the underwriting risk compared to new-money acquisition financings where performance projections are untested.

Large-Cap Direct Lending Platforms - The largest European direct lending funds actively target refinancing mandates, particularly for businesses with EBITDA above EUR 30M where the facility size (EUR 100-300M+) matches their hold capacity. These platforms can underwrite the entire quantum bilaterally, providing immediate certainty of execution. For repricing transactions, their competitive pricing capability - derived from their scale, diversified portfolios, and low cost of capital relative to smaller managers - makes them formidable competitors against incumbent lenders seeking to retain credits. Several large-cap platforms have dedicated refinancing teams that proactively identify candidates approaching maturity.

Mid-Market Direct Lenders - A deep bench of European mid-market direct lending funds targets refinancing transactions for businesses with EUR 10-50M EBITDA. These managers are particularly active in bank-to-private-credit transitions, where the borrower's leverage or structural requirements have evolved beyond bank comfort zones. Their sector specialisation often gives them conviction to underwrite credits that are transitioning from bank relationships, and their hold sizes of EUR 30-150M cover the core mid-market refinancing range. Many mid-market lenders view refinancing mandates as an entry point for long-term relationships with quality borrowers.

Incumbent Private Credit Lenders - Where the existing facility is already provided by a private credit fund, that lender often has the first opportunity to refinance on improved terms through an amend-and-extend arrangement. Incumbent lenders benefit from their existing knowledge of the business, management relationship, and compliance history. However, borrowers should run a competitive process to benchmark incumbent proposals against the broader market - the credible threat of replacement frequently produces meaningful improvements in pricing, covenants, and structural terms from the incumbent, even before formal proposals from alternative lenders are received.

Insurance Company and Pension Fund Lending Arms - For lower-leverage refinancings (below 4x EBITDA) with strong, stable cash flows, insurance companies and pension fund lending platforms can offer pricing advantages due to their lower cost of capital and longer-duration investment horizons. These investors favour long-tenor, investment-grade-adjacent credits and can provide 7-10 year facilities with attractive pricing for businesses that fit their conservative mandate. Their growing involvement in the refinancing market reflects the increasing number of businesses that have deleveraged to levels where insurance capital becomes competitive with traditional direct lending funds.

Deal Reference: European Healthcare Company Bank-to-Unitranche Refinancing

Anonymised reference based on comparable transactions seen on the market.

SectorHealthcare Services
Deal SizeEUR 160M unitranche facility replacing EUR 130M bank club
Leverage4.6x opening leverage on trailing EBITDA of EUR 35M, unchanged from the existing bank facility. The unitranche facility provided EUR 30M of incremental capacity above the existing bank facility quantum, funding the repayment of existing facility breakage costs (1% prepayment premium on the term loan B) and providing balance sheet liquidity for near-term operational requirements and working capital seasonality. Pro forma for the run-rate impact of two recent acquisitions completed under the bank facility, effective leverage approximately 4.1x.
Tenor6-year bullet maturity extending the debt runway from 14 months to over 6 years. Excess cash flow sweep of 50% above 4.0x net leverage, stepping down to 25% below 3.5x. No scheduled amortisation, compared to 2.5% p.a. mandatory amortisation under the bank facility that had consumed EUR 3.25M of annual cash flow.
StructureSingle unitranche facility of EUR 160M at EURIBOR + 575 bps with 0% floor, replacing a five-bank club facility comprising EUR 90M term loan A, EUR 25M term loan B, and EUR 15M revolving credit facility. The bank club had been in place for four years with maturity approaching in 14 months. Three of the five banks had declined to participate in the renewal at existing leverage of 4.6x, citing updated ECB leveraged lending guidance and reduced appetite for the healthcare services sector following portfolio rebalancing. The unitranche facility included an incremental accordion of EUR 40M pre-approved for identified bolt-on acquisitions, and a EUR 15M revolving facility provided by a specialist RCF provider alongside the unitranche lender under a standard AAL intercreditor agreement. Springing leverage covenant at 6.5x tested only when the RCF is drawn above 40%, replacing two maintenance covenants (leverage and interest cover) tested quarterly under the bank facility.
OutcomeThe refinancing was completed in 6 weeks from initial lender engagement, well ahead of the bank facility maturity and removing the overhang that had begun to affect the sponsor's exit planning. The borrower achieved a net margin increase of approximately 175 bps (from the bank blended rate of approximately EURIBOR + 400 bps to EURIBOR + 575 bps) but gained significantly improved structural terms: elimination of scheduled amortisation (saving EUR 3.25M p.a. in cash debt service), removal of two maintenance covenants in favour of a single springing test, expanded permitted acquisition baskets allowing bolt-ons up to EUR 15M individually without lender consent, and a pre-approved incremental facility for the identified acquisition pipeline. Within 12 months, two bolt-on acquisitions were completed using the incremental accordion, growing EBITDA to EUR 42M and reducing leverage to 3.8x - triggering a 25 bps margin ratchet step-down to EURIBOR + 550 bps.

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Frequently Asked Questions

Common questions about this transaction structure

Best practice is to initiate the refinancing process 12-18 months ahead of the existing facility's maturity date. Starting early provides several advantages: the borrower is negotiating from a position of strength rather than under time pressure; there is sufficient runway to run a competitive process and benchmark proposals from multiple lenders; and if market conditions deteriorate during the process, there is time to adjust strategy or wait for an improvement. For bank-to-private-credit transitions, starting early is particularly important because the transition involves a fundamental change in lender relationship and documentation framework. Borrowers who wait until the final 6 months before maturity face reduced negotiating leverage, as lenders know the refinancing is time-critical, and may encounter adverse market conditions that compress the available options.
The direct costs of refinancing typically include: arrangement fees for the new facility (1.0-2.0% of facility size), legal fees for new documentation and discharge of the existing facility (EUR 150-350K depending on complexity and jurisdictions), advisory fees (1.0-1.5% of facility size if using an intermediary like Revelle Capital), and any call protection or prepayment premiums owed under the existing facility (101-102% if within the non-call period, par if outside). Total transition costs typically range from EUR 200K to EUR 750K for a mid-market refinancing. These costs should be evaluated against the benefits: margin savings (if a repricing transaction), elimination of amortisation (preserving cash flow), improved covenant headroom (reducing compliance risk), and structural simplification (reducing ongoing legal and administrative costs). For repricing transactions, the payback period on transition costs is typically 6-18 months from margin savings alone.
Yes, though the process and pricing will reflect the credit history. Borrowers that have experienced covenant breaches, waivers, or amendments under their existing facility can still access private credit refinancing, but lenders will require a thorough understanding of the circumstances, the remedial actions taken, and the current trajectory. A covenant breach caused by a one-off event with clear resolution (a customer loss that has been replaced, a project delay that has been completed) is viewed differently from persistent underperformance against projections. Private credit lenders are experienced in evaluating these situations and can provide refinancing solutions where bank lenders might not - the premium for a credit with a covenant history might be 50-100 bps above a clean credit, but the borrower gains a fresh start with a covenant package calibrated to current performance rather than the outdated assumptions of the original financing.
Repricing involves reducing the margin on an existing private credit facility to reflect an improved credit profile, either through a direct renegotiation with the incumbent lender or by refinancing with a new lender at a lower margin. The typical process involves the borrower demonstrating that its credit quality has improved since the original financing - through EBITDA growth, deleveraging, improved business mix, or market data showing that comparable credits are being financed at lower margins. The borrower then either negotiates directly with the incumbent (offering to extend the call protection period or other lender-friendly concessions in exchange for a margin reduction) or runs a competitive process to generate alternative proposals that demonstrate the achievable pricing. Margin reductions of 25-75 bps are typical in repricing transactions, with the magnitude depending on the degree of credit improvement and the competitive dynamics of the process.
When refinancing from one lender to another, the existing security package must be released by the outgoing lender and re-granted or assigned in favour of the incoming lender. The most common approach is a simultaneous release and re-grant: on the refinancing completion date, the existing facilities are repaid, the existing security is released, and new security documents are executed and perfected in favour of the new lender. In some jurisdictions, security can be assigned or transferred rather than re-granted, which is more efficient but depends on local law. The coordination between incoming and outgoing lenders is managed through payoff letters (confirming the exact amount required to discharge the existing facilities) and release letters (confirming that security will be released upon receipt of the payoff amount). Experienced legal counsel on both sides is essential to ensure seamless execution without any gap in security coverage.
Yes, and this is a common outcome. Many refinancing processes are initiated not with the intention of changing lenders but to create the competitive tension needed to extract improved terms from the incumbent. When presented with a credible competitive proposal, incumbent private credit lenders frequently agree to margin reductions, covenant improvements, or basket expansions to retain the credit - the cost of losing a performing credit (including redeployment risk, pipeline uncertainty, and the loss of a proven borrower relationship) often exceeds the economics of matching a competitive proposal. However, the borrower must be prepared to follow through and change lenders if the incumbent does not offer satisfactory terms. Running a process with no genuine intention to refinance is counterproductive and damages the borrower's credibility in a market where relationships and reputation matter significantly.
A well-executed refinancing typically improves the borrower's credit profile in several ways. Extending tenor removes the overhang of approaching maturity from the credit assessment and eliminates the classification of debt as a current liability as maturity approaches. Improved covenants reduce the probability of technical default and waiver processes that consume management time and legal fees. Structural simplification (consolidating multiple tranches into a unitranche) reduces administrative burden and improves governance clarity. Where the refinancing involves a step-up in facility size with incremental capacity for acquisitions, the borrower gains strategic flexibility without the delays and costs of a separate financing process. The primary cost consideration is that the higher margin associated with private credit refinancing increases cash interest expense, but this is typically offset by the elimination of scheduled amortisation and the operational flexibility gained from a less restrictive covenant package.

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