Carlyle, Goldman Sachs Lend $1.1 Billion PIK to Apex Group

(Bloomberg) -- Carlyle Group Inc. and Goldman Sachs Private Credit have lent a $1.1 billion payment-in-kind note to fund administrator Apex Group, according to a statement from the firm.

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Companies have increasingly been turning to so-called PIK notes in the higher-interest rate environment of the last couple of years. PIK debt allows the borrower to postpone interest payments until the debt matures. While that alleviates short-term debt servicing burdens, interest is added to the principal sum and compounded.

The transaction is expected to fuel growth, according to the statement. PIK debt is often secured against assets in the holdco of a business, not the operating company itself, which is typically the part of the organization that brings in revenue. This is often to allow a business to increase the amount of debt it has without triggering any limitations on any existing debt, such as a covenant dictating leverage.

Carlyle and Goldman Sachs previously provided a preferred equity note in 2020 and further debt in 2021 for the company. Genstar Capital owns the majority of Apex, but sold minority stakes to TA Associates, Carlyle and Mubadala Investment Company in 2021.

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