JPMorgan weighs steep discount on $5bn Qualtrics debt sale

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, as concerns over AI disruption continue to weigh on the sector, according to a report by Bloomberg.

The banks are reportedly 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. The proposed terms would represent one of the largest new-issue discounts in the US high-yield market this year, with a transaction potentially launching 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. However, 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, exposing 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%. Despite generating more than $1.1bn in cash over the past four quarters, the company continues to face challenges integrating the two businesses. The banks are reportedly considering retaining the remaining debt for at least six months, with further sales to leveraged loan investors potentially following the initial bond offering.