KKR taps private credit loan for MYOB

KKR & Co. is in talks for a new loan with private credit lenders for MYOB, an Australian accounting software firm that the private equity giant acquired in 2019, people familiar with the matter said.

The senior loan will be used to repay MYOB's junior debt, according to the people, who asked not to be identified as the matter is private. It will pay a margin in the 400 basis points-plus range, according to the people. The size of the junior tranche in question is A$145 million ($95.7 million) according to data compiled by Bloomberg.

KKR is finalizing the terms and the deal could be wrapped up in the coming days, one of the people said.

The financing is part of broader efforts to lower the cost of debt that financed KKR's purchase of MYOB, which says it has more than a million people in Australia and New Zealand using its software focused on tax and accounting for small and medium businesses. It would also add to a $1.7 trillion global private credit market. Such lending has been growing in the face of potential headwinds with elevated interest rates. 

The new loan has a payment-in kind element to capitalize interest, the people said.   

In addition to junior debt, MYOB has an outstanding covenant-lite senior loan of around A$927 million, denominated in both US and Australian dollars, according to data compiled by Bloomberg. The new loan will be added on to the existing financing. 

The additional financing will also fund a deferred payment called an "earnout arrangement" for MYOB's acquisition of human resources fintech Flare in 2022, according to the people. An earnout arrangement is where part of the purchase price is deferred and calculated on a performance metric. 

KKR declined to comment when contacted.