Key Takeaways
- • JPMorgan Chase-led bank consortium is considering selling nearly $2bn of high-yield bonds tied to the $5bn Qualtrics debt package at around 85 cents on the dollar, with a coupon of at least 8%, according to Bloomberg.
- • The pricing would be one of the largest new-issue discounts in the US high-yield market this year.
- • The debt was underwritten for Qualtrics' $6.75bn acquisition of Press Ganey Forsta, but a March software selloff driven by AI disruption fears forced the 11-bank syndicate to fund the deal itself, exposing lenders to anticipated paper losses above $500m.
- • Qualtrics reported third-quarter revenue of $711m, down from $718m in the prior quarter, with year-on-year growth slowing to 2%, though it generated more than $1.1bn in cash over the past four quarters.
- • The banks are reportedly considering holding the remaining debt for at least six months, with later sales to leveraged loan investors possible after the initial bond offering.
Summary
A consortium of banks led by JPMorgan Chase is weighing a significant discount to sell part of the $5bn debt package backing Qualtrics, the software company owned by Silver Lake, according to a Bloomberg report. Concerns over AI disruption continue to weigh on the software sector. The banks are reportedly preparing to market nearly $2bn of high-yield bonds, potentially with a coupon of at least 8% and a price of around 85 cents on the dollar. The terms would represent one of the largest new-issue discounts in the US high-yield market this year, and the transaction could launch next week, ahead of the Thanksgiving holiday.
The debt was originally underwritten as part of Qualtrics' $6.75bn acquisition of data analytics firm Press Ganey Forsta. A broader software selloff in March, driven by fears that advances in artificial intelligence could undermine traditional software businesses, left the 11-bank syndicate funding the acquisition itself. That exposed lenders to anticipated paper losses exceeding $500m.
Qualtrics reported third-quarter revenue of $711m, down from $718m in the previous quarter, with year-on-year growth slowing to 2%. The company generated more than $1.1bn in cash over the past four quarters, but continues to face challenges integrating the two businesses.
The banks are reportedly considering retaining the remaining debt for at least six months. Further sales to leveraged loan investors could follow the initial bond offering.
The debt was originally underwritten as part of Qualtrics' $6.75bn acquisition of data analytics firm Press Ganey Forsta. A broader software selloff in March, driven by fears that advances in artificial intelligence could undermine traditional software businesses, left the 11-bank syndicate funding the acquisition itself. That exposed lenders to anticipated paper losses exceeding $500m.
Qualtrics reported third-quarter revenue of $711m, down from $718m in the previous quarter, with year-on-year growth slowing to 2%. The company generated more than $1.1bn in cash over the past four quarters, but continues to face challenges integrating the two businesses.
The banks are reportedly considering retaining the remaining debt for at least six months. Further sales to leveraged loan investors could follow the initial bond offering.
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