Thoma Bravo Again Rolls Out Sweeteners With Sophos Debt Deal

Thoma Bravo has begun making concessions to lenders in a bid to refinance the debt of cybersecurity firm Sophos, marking the private equity firm’s latest effort to assuage creditors concerned about AI disruption.

Among the new provisions, Sophos added an “omniblocker” clause — a broad lender protection designed to prevent companies from offering sweeter deals to select groups of creditors often at the expense of others, according to people familiar with the matter.

The company also added measures to curtail moves that subordinate existing lenders, as well as a provision to prevent the transfer of assets like intellectual property away from debt investors, the people said, asking not to be identified discussing private information.

The substantial concessions underscore a shifting landscape for software debt, a sector facing continued pressure as AI technology advances. With nearly $9 billion in software-related maturities coming due over the next two years — the most of its private equity peers — Thoma Bravo’s portfolio is serving as an early test case for how sponsors will navigate the changes. The firm recently made around 40 creditor-friendly amendments to secure a refinancing for Proofpoint, another of its cybersecurity holdings.

Representatives for Thoma Bravo and Goldman Sachs Group Inc., which is leading the financing, declined to comment.

Read More: Thoma Bravo Offers Steep Discount on Sophos Refinancing Deal

Sophos has spent months negotiating an extension for its $2.1 billion loan due in March 2027, but has faced hesitant lenders as AI anxiety snarled up the market. Still, there have been indications some of those fears are abating. That loan is trading at 98.5 cents, according to data compiled by Bloomberg. And Sophos also disclosed 6% growth in annual recurring revenue in the three months to June 30 compared to a year earlier, Bloomberg reported last month.

Thoma Bravo is also betting that moving early with its refinancings will give it the advantage before other sponsors seek to address their looming debt burdens, one of the people said.

The current refinancing package includes a roughly $1.67 billion loan offered at an interest rate of 5 to 5.25 percentage points over benchmarks and a discounted price of 97 cents. The deal also comprises a €350 million loan.

The refinancing also includes a $300 million, privately placed junior piece of so-called payment-in-kind capital, which with $98 million of balance sheet cash, will help reduce overall leverage at the company.

Serta, Pluralsight

In addition to the omniblocker, Sophos added a so-called Serta blocker, which prevents companies from undertaking non-pro-rata debt exchange deals that push creditors down the repayment pecking order. It’s named after a controversial debt restructuring by Serta Simmons Bedding.

Sophos also included a Pluralsight blocker, a provision named after the drop-down tactic used by Vista Equity Partners’ firm Pluralsight, which transferred IP into a new subsidiary and used those assets to obtain financing from Vista.

The terms form part of a credit market lexicon spawned by the frequency of such aggressive corporate debt maneuvers, often called liability management exercises. Notably, Thoma Bravo has never done an LME, according to some of the people.

Like the Proofpoint refinancing, the proposed package for Sophos is covenant-lite, which means Sophos doesn’t have to meet regular financial tests tied to measures such as earnings or leverage to remain in compliance with the terms of the loan.

In the Proofpoint deal, almost all of the existing lenders agreed to participate in the refinancing, said one of the people.