(Bloomberg) — Banks led by JPMorgan Chase & Co. could offer one of the year’s biggest discounts to sell some of the $5 billion in debt for software firm Qualtrics International Inc. that the underwriters were stuck holding a few months ago.
Bankers have scheduled meetings with investors this week to discuss the sale of nearly $2 billion of debt in the high-yield bond market, according to people with knowledge of the matter. Initial indications are that the debt could be marketed at a coupon of at least 8% and a discounted rate of about 85 cents on the dollar, said the people, requesting anonymity as the talks are private.
If a deal was struck at that price, it would represent one of the biggest new-issue discounts for a debt sale in the US high-yield market this year, according to data compiled by Bloomberg. A number of software companies have had to pay high borrowing costs and boost protections to lock in lenders in recent months, as concerns about AI-disruption to their businesses have intensified.
A debt sale for Qualtrics could come as soon as next week and price before the Thanksgiving holiday, the people said. Representatives for JPMorgan and private equity firm Silver Lake, which owns Qualtrics, declined to comment. A representative for Qualtrics didn’t respond to a request for comment.
Qualtrics, which makes online survey tools, agreed to buy data analytics firm Press Ganey Forsta more than a year ago in a deal valued at $6.75 billion. Eleven banks committed about $5.3 billion in debt financing for the transaction, and the group started preliminary discussions with investors earlier this year to sell that down.
But they were forced to pause those talks in March after the company became caught up in a wider software selloff, prompted by worries that advances in artificial intelligence could render some businesses obsolete. The banks ended up funding the purchase themselves, shouldering what at the time was expected to be more than $500 million in paper losses.
The underwriters decided to wait until Qualtrics posted its earnings for the third quarter to revive the deal. Those results last week showed the company is still working to integrate the two businesses to drive revenue growth, according to people familiar with the matter.
Qualtrics told lenders its revenue for the period slipped to $711 million from $718 million in the second quarter, according to some of the people. Compared with a year ago, revenues grew 2%, slower than the 6% and 7% the company reported in the prior two quarters compared with the previous year, the people said. The company has generated more than $1.1 billion in cash over the past four quarters, including $230 million in the third and $179 million in the second, the people added.
The banks are hoping to sell part of the financing this month, and could offload more of this debt to leveraged loan investors at a later date. The 11-member bank group is also discussing an agreement to hold onto the remainder of the debt for at least six months, unless all lenders agree to a sale, some of the people said.
Qualtrics’ existing loan pays 2.25 percentage points over the US benchmark, which is much lower than where new software debt is being sold. That loan, due in 2030, has been declining, and was quoted at between 81 and 83 cents on the dollar by some brokers on Monday.
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