Banks Launch $5 Billion Loan for KKR’s Cotiviti Stake Deal

 A group of banks launched a $5 billion leveraged loan sale on Wednesday to help finance KKR & Co.’s purchase of a stake in Cotiviti Inc., according to people with knowledge of the matter.

The sale is broken up into a $4.4 billion floating rate term loan led by JPMorgan Chase & Co. and a $600 million fixed rate term loan led by Goldman Sachs Group Inc., one of the people added.

It’s a win for Wall Street banks that competed with private credit funds to provide one of the biggest debt packages in months. Both groups have been jockeying to finance a limited number of leveraged buyouts as private equity sponsors struggle to sell their portfolio companies.

Pricing discussions on the seven-year floating rate loan are for 3.5 percentage points over the Secured Overnight Financing Rate and a discounted price of 99.5 cents on the dollar, said the person, who asked not to be identified discussing a private deal. That’s significantly cheaper for Cotiviti than the debt package private credit firms were arranging in 2023 at a margin of around 5.25 to 5.5 percentage points over SOFR.

KKR’s agreement to buy the stake from Veritas Capital values the healthcare analytics company at around $10.5 billion, according to another person with knowledge of the matter. Ownership of Veritas’s stake in the business is being moved from a prior fund to Veritas Fund VIII, some of the people said.

Representatives for Cotiviti, Goldman Sachs, JPMorgan and KKR declined to comment. Veritas didn’t immediately respond to a request for comment.

KKR’s capital markets arm worked the phones in recent weeks to round up investors willing to provide the committed financing, Bloomberg previously reported. It’s also working with JPMorgan and Goldman to complete the deal, one of the people said. The $5 billion debt deal was oversubscribed at launch, meaning there are already enough orders to exceed that size, one of the people added.

Read more: KKR Becomes Wall Street’s Best Ally to Win Prized Cotiviti Deal

Proceeds from the proposed loan and new equity will fund the leveraged buyout and repay the company’s existing debt, according to a Moody’s report.

After months of news reports, Cotiviti formally announced the transaction in a statement on Wednesday, following the Wall Street Journal’s earlier report that the deal had been finalized. KKR and Veritas will become co-sponsors with equal ownership stakes in Cotiviti and the transaction is expected to close in the second quarter of 2024, according to the news release.

An investor call for the loan is scheduled for 3 p.m. New York time on Wednesday, and commitments are due on Feb. 21 at noon New York time.

--With assistance from Gowri Gurumurthy and Carmen Arroyo.