A consortium of banks led by JPMorgan Chase is considering offering a significant discount to sell part of the $5bn debt package backing Silver Lake-owned software company Qualtrics, according to Private Equity Wire. The banks are preparing to market nearly $2bn of high-yield bonds, potentially offering a coupon of at least 8% and a price of around 85 cents on the dollar, according to Private Equity Wire.
Proposed bond terms and timeline
The proposed terms would represent one of the largest new-issue discounts in the US high-yield market this year, according to Private Equity Wire. The transaction could launch next week ahead of the Thanksgiving holiday, according to the same report.
Debt package background and syndicate exposure
The debt was originally underwritten as part of Qualtrics’ $6.75bn acquisition of data analytics firm Press Ganey Forsta, according to Private Equity Wire. A broader software selloff in March, driven by concerns that advances in artificial intelligence could undermine traditional software businesses, forced the 11-bank syndicate to fund the acquisition itself, according to the report. That outcome exposed lenders to anticipated paper losses exceeding $500m, according to Private Equity Wire.
Qualtrics operating metrics and integration challenge
Qualtrics reported third-quarter revenue of $711m, down from $718m in the previous quarter, according to Private Equity Wire. The company’s year-on-year growth slowed to 2%, according to the report. Qualtrics generated more than $1.1bn in cash over the past four quarters, according to Private Equity Wire. The company continues to face challenges integrating the two businesses, according to the report.
Remaining debt and potential follow-on sales
The banks are considering retaining the remaining debt for at least six months, according to Private Equity Wire. Further sales to leveraged loan investors could follow the initial bond offering, according to the report.
The report attributes the debt-sale considerations to a consortium of banks led by JPMorgan Chase and links the discount discussion to concerns over AI disruption weighing on the software sector, according to Private Equity Wire.
