Private equity firm Pamplona Capital Management has set up a $290 million credit line from pulling capital from drug testing company Parexel International Corp.’s existing debt, a company it bought in 2017, according to Bloomberg.
The investment firm set up a credit line at the drug testing company and secured it with the unpaid bills of Parexel’s customers. The borrowing allowed Pamplona to cut the amount of equity it was risking in the buyout. But it hurt the investors that had already lent around $3 billion to the company, only to see it take on more debt, reported Bloomberg.
Two weeks ago Parexel said that it would enter a 30-day grace period for the release of its audited financial statements for the fiscal year that ended in June.
The new loans that Parexel took out have the highest priority among its debt: If the company falls into trouble, these lenders are the first to get paid, known as “receivables financing,” relatively cheap, and companies often use it to fund their daily operations rather than to pay dividends to their owners.
