The failure to sell the debt is a result of deepening anxiety over exposure to a sector being upended by AI, with many software-as-a-service companies seen as particularly vulnerable.
A group of banks led by Deutsche Bank AG has been unable to sell about $1.2 billion of loans backing the acquisition of a software provider -- the latest casualty of investor fears surrounding disruption from artificial intelligence.
Deutsche Bank told prospective creditors that the group will instead fund Conga Corp.'s acquisition of PROS Holdings' B2B unit with a $625 million term loan, according to people familiar with the matter who asked not to be identified discussing private information. The group was also due to refinance a $540 million loan maturing in 2028, which will now remain outstanding, the German bank told investors.
Deutsche Bank had struggled to generate interest in the debt amid deepening anxiety over exposure to a sector currently being upended by AI. Conga, which is backed by private equity firm Thoma Bravo LLC, provides document automation software for businesses. Many such SaaS -- or software-as-a-service -- companies are seen as particularly vulnerable because AI models are increasingly capable of writing code and analyzing data, tasks they typically handle.
A representative for Thoma Bravo declined to comment. Representatives for Deutsche Bank didn't have an immediate comment while Conga didn't immediately respond to requests for comment.
Deutsche Bank launchedBloomberg Terminal the debt for Conga last month, offering a $1.17 billion loan at an interest rate of 4 percentage points over the benchmark rate and at a discount between 97.5 cents to 98 cents on the dollar. The bank told investors in its note that the acquisition was expected to close on Monday and that it will continue to try and sell the debt.
Failure to sell committed debt to third-party investors before an acquisition closes leaves banks stuck with those borrowings on their balance sheet. When so-called hung debt piles up, it means less capacity for lenders to underwrite future loans.
The risk of AI disruption has weighed on credit markets globally. Shares of business development companies -- which pool private credit loans -- fell this week amid concerns over the group's widespread exposure to software. In recent days, Blue Owl Capital Inc. revealed significant outflows from a tech-focused fund, and two European software firms put loan deals on ice.
