The market has seen a sharp revaluation of software company loans over the last month, with roughly $17.7 billion of US tech debt moving into distressed status during that period, according to data compiled by Bloomberg Intelligence. That surge has brought the aggregate of tech loans deemed distressed to about $46.9 billion, the highest level recorded since October 2022.
Market observers have dubbed the wave of selling the "SaaSpocalypse." The pressure has been especially acute among software-as-a-service, or SaaS, businesses, which market participants view as particularly exposed to disruption from artificial intelligence as AI tools are increasingly applied to tasks such as coding and data analysis.
Among the specific credits that slipped into distress are loans tied to healthcare software provider FinThrive and to Perforce Software, both portfolio companies backed by Clearlake Capital. Another affected name is Precisely, a data integrity software firm owned by Clearlake and TA Associates, whose loan declined by eight cents this week.
Other leveraged loans are reported to be approaching stressed thresholds. Loans linked to firms owned by private equity firm Thoma Bravo, including Dayforce, a human resources management software provider, and Calabrio, which makes call center technology, were cited as nearing stressed levels.
Industry practice classifies loans as distressed when they trade at yields more than 10 percentage points above the benchmark Secured Overnight Financing Rate, and loans that remain at such levels for sustained periods typically encounter difficulty in accessing traditional debt markets.
The recent repricing has concentrated on a narrow segment of the market and reflects investors' reassessment of credit risk within the tech and software loan universe. The findings from Bloomberg Intelligence underline how quickly credit perceptions can shift, particularly for sectors viewed as susceptible to technological disruption.
Summary: A rapid selloff in software loans has pushed $17.7 billion of US tech debt into distressed territory over the past four weeks, expanding the total distressed tech debt pile to about $46.9 billion. The move has been concentrated in SaaS companies, with several private-equity-backed firms affected. Loans are considered distressed when trading at yields more than 10 percentage points above SOFR.