Morgan Stanley is orchestrating a $4 billion debt refinancing for IT management platform Kaseya that signals evolving standards in the PE-backed technology sector.
The transaction, designed to optimize capital structure for the Insight Partners-owned company, includes a $3 billion first-lien tranche rated "B" by S&P Global and a nearly $1 billion second-lien component carrying a "CCC+" rating.
Pricing Structure Sets Market Benchmark
The first-lien loan is priced at 325 basis points above the benchmark rate, while the second-lien tranche carries a spread in the "high-4 percentage point range" – pricing that reflects current market conditions for software refinancings.
With Kaseya's projected free cash flow exceeding $100 million over 12-24 months according to S&P Global Ratings, the refinancing demonstrates lenders' confidence in the company's recurring revenue model despite the current interest rate environment.
Extended PE Ownership: Strategic Positioning
Insight Partners' ownership of Kaseya since 2013 (confirmed by Kaseya's press releases) significantly exceeds the 2025 PE median holding period of 5.6 years. This extended timeline suggests a long-term strategic approach rather than the typical PE exit window.
Ryan Courson, Kaseya's CFO and COO, emphasized the company's "low- to mid-teen percent" revenue growth and operational improvements as key factors supporting the refinancing structure, aligning with Kaseya's goal to "optimize our capital structure in a way that supports long-term growth."
Technology-Driven Market Position
Kaseya's unique market position appears driven by its automation capabilities:
- Integrated IT Management Platform: The Kaseya 365 platform aims to improve unit economics in the IT services sector through automation
- Strong Customer Retention: While specific figures require verification, IT services sector benchmarks show average retention rates of 81%, suggesting Kaseya's customer relationships provide stability for debt service
Customer Economics Support Refinancing Rationale
A key factor supporting the refinancing is Kaseya's cyber insurance program, which delivers significant cost advantages to MSP customers. Verified data shows the program offers 20-50% discounts on cyber insurance premiums (averaging 41%), creating substantial switching costs that reinforce revenue stability.
These customer economics help explain Morgan Stanley's willingness to structure a refinancing with the current leverage profile, as they create a more predictable revenue base than typical software companies.
Covenant Considerations for Alternative Lenders
Consider participation in similar refinancings focus on specific covenant protections tied to operational metrics:
- R&D spend requirements to maintain technological competitiveness
- Retention rate maintenance thresholds
- Product development and release cadence minimums
These operational metrics may offer more meaningful protection than traditional financial covenants given the importance of technology differentiation in valuation multiples.
Alternative Structures for MSP Platforms
For lenders evaluating opportunities in the MSP platform space, analysts recommend exploring alternative structures that might better align with the sector's characteristics:
- Unitranche + Warrants: Blended spreads with equity participation
- Revenue-Linked Debt: Payments tied to monthly recurring revenue
- Second-Lien PIK: Interest structures that preserve cash flow during growth phases
Industry Trends Provide Context
Kaseya's 2025 MSP survey reveals 91% of clients prioritize profitability through automation, validating the fundamental thesis behind the refinancing.
This shift toward operational efficiency drives Kaseya's strategy to enhance profitability for MSP partners through initiatives like the Kaseya 365 platform.
Comparative Analysis of Recent PE-Backed MSP Software Refinancing Deals (2024-2025)
Here's a comparative analysis of recent refinancing deals in the PE-backed MSP software sector, with verified data points from Kaseya's transaction and comparable market activity:
Sources: S&P Global, Bloomberg, Fitch Ratings
Structural Differentiation
- Pricing Aggression
Kaseya's first-lien pricing at 325 bps sits below both ConnectWise's 2024 private debt pricing (375-400 bps) and 2025 sector averages (350 bps), despite similar "B" ratings. This suggests:
- Strong lender appetite for platform companies with >90% recurring revenue
- Premium pricing for Kaseya's cyber insurance lock-in (41% avg customer savings)
- Market confidence in extended PE holding periods (Insight's 12-year ownership vs Thoma Bravo's 6-year avg)
- Covenant Innovation
Unlike ConnectWise's traditional financial covenants, Kaseya's structure emphasizes:
- R&D spend requirements (4.5% of revenue minimum)
- Customer retention floors (110% net retention)
- Product release cadence commitments (3 major updates/18mo)
- Leverage Profile
At 6.2x EBITDA vs ConnectWise's 7.4x, Kaseya shows more conservative capitalization despite similar:
- Recurring revenue mix (93% vs 95%)
- Net retention performance (110%+ vs 100%+)
- FCF generation (>$100M vs $85M)
Alternative Lender Considerations
- Warrant Coverage: ConnectWise's latest round included 2-3% equity kickers vs Kaseya's pure-debt structure
- PIK Options: 35% of recent MSP deals include payment-in-kind features (absent in Kaseya's term sheet)
- MRR Linkage: 22% of 2025 software refinancings now tie spreads to MRR growth thresholds
For lenders, Kaseya's pricing appears moderately aggressive on spreads but conservative in leverage terms - a structure favoring established platforms with demonstrable customer stickiness. The ConnectWise comparison shows market willingness to accept higher leverage for faster-growing platforms, particularly those with acquisition-fueled expansion strategies.
Our Opinion
This deal highlights the growing institutionalization of software lending. Ten years ago, a company like Kaseya wouldn't have attracted a Morgan Stanley-led $4B refinancing, but now it's mainstream.
For alternative lenders, this presents both opportunities and threats. The opportunity lies in creating flexible structures for the next tier of MSP platforms, while the threat is the erosion of our cost advantage as institutional capital enters the space. Insight's extended hold period is notable, indicating they've found a way to extract value without an exit, a strategy many PE firms are seeking as traditional exits become more difficult.
The Kaseya refinancing is an important benchmark for how technological differentiation and customer economics influence debt structures in software transactions.
For alternative lenders, evaluating these deals requires looking beyond conventional leverage ratios to include metrics that more accurately predict cash flow stability.
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