Deutsche Bank Group Stuck With Software Loans in Rare Hung Deal
(Bloomberg) — A group of banks led by Deutsche Bank AG failed to sell nearly $1.2 billion in loans supporting the acquisition of a software provider; This is the latest casualty of investors’ fears about AI disruption.
Deutsche Bank told potential creditors that the group would instead finance 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 named due to private information. The German bank told investors that the group would also refinance a $540 million loan due in 2028, which would remain outstanding.
Deutsche Bank has struggled to generate interest on the debt amid deepening concerns about exposure to an industry already being disrupted by artificial intelligence. Conga, backed by private equity firm Thoma Bravo LLC, provides document automation software to businesses. Many such SaaS (or software-as-a-service) companies are seen as particularly vulnerable because AI models are becoming increasingly capable of writing code and analyzing data, tasks they typically undertake.
A representative for Thoma Bravo declined to comment. Deutsche Bank representatives had no immediate comment, while Conga did not immediately respond to requests for comment.
Deutsche Bank initiated borrowing for Conga last month, offering a $1.17 billion loan at an interest rate of 4 percentage points above the benchmark interest rate and a discount of 97.5 to 98 cents on the dollar. The purchase is expected to be completed on Monday and will continue to sell the debt, the bank said in a note to investors.
Failure to sell committed debt to third-party investors before an acquisition is completed leaves banks stuck with these debts on their balance sheets. When outstanding debts accumulate, this means lenders’ ability to take on future loans decreases.
The risk of AI disruption has put pressure on credit markets globally. Shares of business development companies that pool private credit loans have fallen this week on concerns about the group’s widespread exposure to software. Recently, Blue Owl Capital Inc. It revealed a significant outflow from a technology-focused fund and two European software firms shelved loan deals.
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