.jpg)
7 hours ago
2
Article content
Representatives for Dayforce, Cloudera, Rocket and CDK didn’t immediately reply to requests for comment. Rackspace declined to comment.
Article content
“There is a certain element of throwing the baby out with the bathwater,” said Pratik Gupta, who leads CLO and RMBS research at Bank of America Corp. “The software sell-off got pushed into names which likely are not going to be affected by AI.”
Article content
A key fear is that AI will allow more companies and people to build their own custom software, reducing demand for off-the-shelf software products and services. Anthropic this month introduced a product, Claude Cowork, that looks like a chatbot but can complete tasks on your behalf like building apps and making spreadsheets. Recent media accounts have described how Claude makes coding easy for people with no formal training.
Article content
A Morgan Stanley report on Friday recommended shorting AI-exposed credits, and favoring junk bonds over leveraged loans because of the latter’s greater exposure to potential disruption in the technology and software space.
Article content
It’s not clear how many companies that are being hit in the market now are actually at risk of being undermined by AI. The selloff is also irrespective of underlying fundamentals, according to Beach Point Capital’s Bowron. He points out that many firms in the space generally report good results and are still gaining customers. “These are incredibly deeply entrenched software suites in company processes,” he added. “It would take potentially years to rip out and replace some of these.”
Article content
Article content
For the technology sector generally, a lot of deals done about five years ago were priced to reflect high-growth assumptions that in many cases haven’t panned out, said Ari Lefkovits, managing partner at Delos Capital who has advised companies on restructurings and other corporate finance transactions. In the years since, those companies also had to pay higher coupons as interest rates rose.
Article content
“The businesses aren’t broken,” Lefkovits said. “It’s just the balance sheets are stressed too much.”
Article content
Click here for a podcast with Pimco on the hazards in private debt
Article content
Week In Review
Article content
- Sales of US investment-grade corporate bonds smashed the prior record for a January and exceeded $200 billion for just the sixth month ever, part of a global debt-issuance surge as borrowers take advantage of reduced borrowing premiums.
- The selling fervor isn’t over. A borrowing bonanza to bankroll artificial intelligence projects could push February corporate bond sales to a record, even as warnings against complacency continue to percolate across credit markets.
- One such investor — DoubleLine Capital LP — is reining in its corporate-debt buying, fearing that an already frothy market is growing more perilous as richly valued companies prepare for record borrowing to fund the AI boom and acquisitions. In Europe, software firm Team.Blue halted a leveraged loan deal after investors soured on a sector facing disruption from AI.
- The selling fervor isn’t over. A borrowing bonanza to bankroll artificial intelligence projects could push February corporate bond sales to a record, even as warnings against complacency continue to percolate across credit markets.
- A BlackRock Inc. private debt fund plunged the most in almost six years after it disclosed writedowns across a series of troubled investments and waived some of its fee.
- Separately, investors pulled about 15.4% of net assets from one of Blue Owl Capital Inc.’s tech-focused funds, after the vehicle’s decision to dramatically increase the amount investors could withdraw.
- Apollo Global Management Inc. took a loss on a portion of a $170 million asset-backed financing for Amazon brand aggregator Perch that was written off to zero, a rare stumble for a strategy touted as one of private credit’s safest and most promising.
- Junk-debt sales on both sides of the Atlantic surged as firms took advantage of easing geopolitical tensions after US President Donald Trump abandoned his Greenland-linked tariff threats.
- Banks are preparing to sell about $7.9 billion in debt as early as February to finance Clayton Dubilier & Rice’s buyout of packaging firm Sealed Air Corp.
- Banks led by Deutsche Bank AG began marketing a $550 million junk bond that will help fund TreeHouse Foods Inc.’s pending buyout, bringing planned financing for the deal to $1.8 billion.
- In just two days, three Chinese property companies have tapped the international bond market in the busiest week in almost four years, taking advantage of improving sentiment for the sector. Two industry heavyweights, Shenzhen-based China Vanke Co. and Hong Kong-listed developer New World Development Co., helped buoy the broader mood by making progress in efforts to distance themselves from crises that previously left them on the verge of default.
- CVC Capital Partners Plc agreed to buy Marathon Asset Management as part of efforts to widen its footprint in US credit markets, the latest example of consolidation among alternative investment firms.
- Private equity firm Permira kicked off the sale of German pharmaceutical company Neuraxpharm, with lenders readying debt financing of as much as €1.5 billion ($1.8 billion) for potential bidders.
- First Brands Group founder Patrick James and his brother Edward, a former executive at the company, were indicted in New York following the collapse of the bankrupt auto-parts maker last year.
- Multiple trading desks are starting to quote the most-valuable portion of Saks Global Enterprises’ $1 billion bankruptcy loan, just weeks after the iconic luxury retailer filed for Chapter 11 protection.
- Amazon.com Inc. and luxury groups including LVMH and Chanel Ltd. will serve on the official committee of unsecured creditors in the bankruptcy of Saks, positioning them to influence how the retailer restructures.
- Gains in some corporate bonds are evaporating due to an often overlooked clause that has become more prevalent in documentation over recent years: clean-up calls.
- FAT Brands Inc., the owner of restaurant chains Fatburger, Johnny Rockets and Twin Peaks, filed for bankruptcy, adding to a string of casual-dining brands that have sought court protection from creditors.
- Multi-Color Corp. filed for prepackaged bankruptcy after enough creditors agreed to back a plan to slash the company’s debt by more than half.
- Wes Edens’ New Fortress Energy Inc. is ironing out a proposed restructuring support agreement that would see creditors get preferred equity in the reorganized liquefied natural gas operator.
- Cubic Corp. has notified lenders that it plans to defer an interest payment on a chunk of its debt, some seven months after cutting its borrowings and receiving a fresh equity injection.
Article content
Article content
On the Move
Article content
- Hudson Bay Capital Management brought on a team of ex-BlackRock Inc. executives to start a new private credit strategy for the $20 billion money manager.
- Goldman Sachs Group Inc. named Wolfgang Fink and Macario Prieto co-chairs of its EMEA Alternatives Origination Group, adding to leadership changes across its global credit business.
- Citigroup Inc.’s Benjamin Ng, a veteran loan banker based in Hong Kong, left after more than two decades with the US lender.
- Blackstone Inc. is planning to hire more people across Asia to tap growing opportunities in private markets, according to Ed Huang, the firm’s head of Asia Pacific private wealth.
- Deutsche Bank AG is deepening its push into emerging-market credit, adding two executives in New York as part of an expansion that began last year. The executives are Thomas Fitzpatrick, who previously held senior trading roles at Mizuho Securities USA LLC and UBS, and former HSBC Securities trader Christopher Staudt.
- Banco Bradesco SA, the second-biggest underwriter of local bonds last year in Brazil, plans to hire 16 fixed-income bankers in 2026 to help it unseat No. 1 ranked Banco Itau BBA.
Article content
English (US)