Blackstone gives Press Ganey rare flexibility in $1B deal

Blackstone Inc. led a roughly $1 billion preferred-equity investment backing Press Ganey’s debt refinancing that includes rare concessions that make it easier for the company’s owners to sell a stake or list the business over the coming months.

The deal’s call provision allows the healthcare survey provider and consultant to pay back the obligation with proceeds from an initial public offering or minority equity investment at 101.5 cents on the dollar for as long as 18 months, according to people with knowledge of the transaction. Such flexible terms are unusual — most preferred investments typically can’t be repaid so soon with fresh equity, a safeguard meant to ensure holders will have a minimum number of years to profit from the investment.

The financing is another example of money managers flush with cash and dealing with limited investment opportunities offering more borrower-friendly terms as they try to win deals. The rate on the preferred investment is around 12.5%, said the people, and the company can defer interest rather than paying in cash, according to a ratings report. Blackstone is providing about $600 million of the financing, with Oaktree Capital Management and Harvest Partners also participating, the people said.

Press Ganey didn’t respond to a request seeking comment. Representatives from Blackstone, Press Ganey’s private equity owners Ares Management Corp. and Leonard Green & Partners, as well as Oaktree and Harvest Partners declined to comment.

Competition among alternative asset managers to deploy capital is heating up across the credit spectrum. Blackstone and Goldman Sachs Asset Management earlier this month provided a direct loan to KKR’s Depot Connect International with a 99.75 cent issue discount, one of the smallest ever in private credit. EQT AB is tapping a group of direct lenders for about $1 billion at one of the cheapest rates seen in the market, Bloomberg previously reported.

Press Ganey, which was bought by Ares and Leonard Green in 2019, raised a $2.2 billion loan facility in the broadly syndicated market last month that was also used to refinance older debt. Its new capital structure is helping the company lower its leverage — a measure of debt to earnings — to about 7 times from 9 times, according to a report from Moody’s Ratings.

S&P Global Ratings said in a report it expects the company to generate positive free operating cash flow of $15 million to $25 million for 2024 following the refinancing. It previously said it expected the company to just break even this year.

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