Banks aim for late-March to early-April launch of Qualtrics $5.3 billion debt package
Debt includes $3.3 billion term loan and $2 billion in bonds
Deal seen as bellwether for new software debt after sector selloff
By Matt Tracy and Saeed Azhar
WASHINGTON/NEW YORK, March 6 (Reuters) - Banks are expected to start marketing $5.3 billion in loans and high-yield bonds from software provider Qualtrics in late March or early April, three bankers familiar with the matter said, in one of the sector's first debt deals since last month's rout in software stocks.
No major debt deals backed by software companies have been sold in the primary market since Oracle's $25 billion debt package priced on February 2. Deals have been sidelined as investors worry that artificial intelligence could replace many of the software products and services that tech companies provide.
Qualtrics, which provides an AI-driven data platform for businesses, is raising the funds to finance its $6.75 billion acquisition of health tech firm Press Ganey Forsta, which was announced in October.
The bankers, who asked not to be identified to discuss the confidential deal, said the company needs to sweeten its original terms to attract enough buyers.
Qualtrics declined to comment. Silver Lake and CPP Investments bought Qualtrics in 2023 for $12.5 billion.
The acquisition of Press Ganey Forsta is being financed by a $5.3 billion debt package comprising a $3.3 billion term loan and $2 billion in high-yield bonds, two of the bankers said.
JPMorgan JPM.N is lead arranger of the debt package. BMO BMO.TO, Citi C.N, Deutsche Bank DBKGn.DE, Goldman Sachs GS.N, KKR Capital Markets, Mizuho Securities MZFGX.UL, Morgan Stanley MS.N, RBC, UBS UBSAG.UL and Wells Fargo WFC.N also provided debt commitments. The banks aim to market the loan and bonds in late March or early April, the three bankers said. JPMorgan declined to comment.
The debt's $3.3 billion term loan component was originally expected in January to price at 275 basis points (bps) over the Secured Overnight Financing Rate $(SOFR)$ with an original issue discount to investors of 5 cents on the dollar, according to one of the bankers.
The recent market turmoil, however, has banks anticipating an additional 200 bps to 250 bps in price concessions to investors when the deal does come to market, according to one of the bankers and another banker familiar with the deal. Investors typically demand a higher interest rate when a loan is viewed as more risky.
Several bond and loan deals for software companies have been canceled or pulled by banks from the market during the software rout, which began in late January and escalated after Anthropic unveiled the latest tools for its Claude Cowork AI agent in early February.
A repricing of European digital services provider Team.blue's existing $771 million term loan was among deals that were pulled from the market, according to Pitchbook data.
But the banks that underwrote Qualtrics' debt view the company as a long-term winner in the sector, in large part due to its and Press Ganey's strong cross-industry data ownership.
Debt funding for M&A activity accounts for $60 billion of the new loan and bond deals currently in banks' pipelines, according to the bankers.
That includes debt financing for the $55 billion buyout of video game developer Electronic Arts EA.O by a private equity consortium that includes Saudi Arabia's Public Investment Fund. Electronic Arts, which announced the deal last year, did not immediately respond to requests for comment about the debt financing.
(Reporting by Matt Tracy in Washington and Saeed Azhar in New York; Editing by Dawn Kopecki and Edmund Klamann)
((Matt.Tracy@thomsonreuters.com; +1 571 643 3562))
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