A group of banks led by JPMorgan Chase & Co. is planning to offload about $5.3 billion in financing for software firm Qualtrics International Inc. later this year in a bid to shift the hung debt off their books.
The lenders used their balance sheets to fund the deal last month, according to people with knowledge of the matter, after they opted against a formal syndication of the leveraged loan following discussions with investors wary of the software sector. If banks haven’t sold off an underwritten debt financing by the time an acquisition closes, the deal shows up on their books and is considered “hung”.
The banks now plan to wait until after third-quarter results around the end of September to try to sell the debt to institutional investors, and are likely to change the structure to include junk bonds, the people added, asking not to be identified because they’re not authorized to speak publicly. High-yield bonds and private credit options had been under consideration earlier this year when the banks were initially looking to shift the debt as the software sector cratered.
The lenders are hoping that third-quarter results will push the price of the Qualtrics’ existing $1.5 billion 2030 loan higher in the secondary market.
The debt has slumped to about 83.75 cents on the dollar in secondary trading, from close to par in February. Banks will have to be mindful when issuing the new financing so investors don’t end up paying more for a newly-issued loan.
Representatives for Silver Lake Management, which owns the company, JPMorgan and Qualtrics declined to comment.
Developing Discernment
The market is starting to become more discerning on software deals, distinguishing between the products that are deeply embedded with customers and those likely to be displaced by AI.
This month, for instance, Arcmont Asset Management and Ares Management Corp. were among a group of high-profile private credit firms lending €1.1 billion to French business software firm Cegid, a Silver Lake Management-backed company, in a show of confidence for the sector.
Elsewhere, Carlyle-backed software firm Autoform is in the market looking to extend €672 million of its existing term loan B due February 2029 by three years. Notably, unlike in its previous financing, the company described itself as a “global provider of end-to-end high tech engineering solutions” rather than a software firm.
Banks led by UBS Group AG are also looking to offload more than $700 million of debt they’ve held on their balance sheets for months after funding Echo Global Logistics Inc.’s acquisition of ITS Logistics with their own cash.
Read More: Banks Seize Hot Market to Offload Hung Loan for Echo Global
Press Ganey, a software platform that’s used by healthcare firms to collect and analyze patient and employee data, is seen as a solid market leader, and not as susceptible to AI risk, some of the people said.
Hot Market
Back in October, 11 lenders provided committed debt financing for the Press Ganey acquisition. Banks were expected to shoulder paper losses of more than $500 million on Qualtrics’ debt but it’s possible that some of that will be reversed once they bring the transaction back to market.
The leveraged loan and high-yield bond markets have been riding a technical wave that has pushed pricing tighter as investors seek to deploy huge sums of capital into very few new deals. That’s led to a market where debt is trading up and private equity firms are repricing existing margins lower.
Wall Street got stuck with $13 billion of debt that Elon Musk heaped onto X during his surprise bid to take the company — then known as Twitter — private in 2022. In 2025, a group of Morgan Stanley-led banks sold the entire remaining slug of the highest-ranking borrowings used to fund the buyout of the platform at a price that guaranteed no losses for the banks.
Qualtrics is the biggest deal to have run into trouble this year. In February, a Deutsche Bank AG-led group was unable to sell about $1.2 billion of loans supporting an acquisition by Thoma Bravo-backed Conga Corp., another software business.