Private Credit’s Salt Fight Shows ‘Anything But Software’ Push

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessPrivate Credit's Salt Fight Shows 'Anything But Software' PushIn a tongue-in-cheek private credit glossary making the rounds, ABS, the usual abbreviation for asset-backed securities, has been rebranded as “anything but software.”Author of the article:Ellen DiMauro and Reshmi Basu You can save this article by registering for free here. Or sign-in if you have an account.pqe6b7cqo5]li6{0cdv4ohu2_media_dl_1.png via Bloomberg(Bloomberg) — In a tongue-in-cheek private credit glossary making the rounds, ABS, the usual abbreviation for asset-backed securities, has been rebranded as “anything but software.”THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountOnce darlings of the market, software firms have turned into black sheep as artificial intelligence threatens to upend their businesses. While much activity has shifted toward financing the AI infrastructure buildout, demand is also growing for asset-heavy, old-economy businesses.Take, for example, American Rock Salt, which mines and sells road salt and other sodium chloride products. Despite the firm’s junk ratings, lenders are currently duking it out over the company. American Rock Salt is working with Morgan Stanley to refinance more than $700 million of debt as its financial situation improves, according to people familiar with the matter. Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againThe bank has been soliciting feedback on structure and pricing from private credit managers as well as existing lenders of its broadly syndicated loans, said the people, asking not to identified discussing a private matter. The potential debt financing could price at 5 percentage points over the benchmark rate for the first-lien loan and 8 percentage points for second-lien obligations.Details are still being ironed out, and a deal may not materialize. A representative for Morgan Stanley declined to comment, while a representative for American Rock Salt didn’t respond to requests for comment.American Rock Salt’s assets include the largest operating salt mine in the US, selling to state and local government agencies in the northeast, according to its website. Moody’s Ratings assigned a Caa2 credit score to the firm in May — eight rungs into junk territory. While cautious due to the company’s high leverage and weak liquidity, the rater highlighted American Rock Salt’s high-quality mine asset and modest capital expenditures.Direct lenders have focused on hard assets as a way to dodge volatility in technology. The “SaaSpocalypse” earlier this year that stemmed from jitters over AI contributed to a surge in redemption requests as investors sought to pull out more than $13 billion from over a dozen non-traded business development companies.“Given recent volatility in the SaaS sector and noise around investor redemptions, private credit investors may be putting a premium on hard assets that can be monetized in a downsized scenario more quickly and cheaply than intangible assets,” said Michael Handler, a partner at law firm King & Spalding.The company has been buoyed by harsh winters driving demand for de-icing salt, and investors like that the business is structured as a partnership, which incentivizes leaders to keep it out of bankruptcy, the people familiar said. Its $485 million first-lien loan due in 2028 is quoted at about 97 cents on the dollar, up from 73 cents on Sept. 25, prior to the onset of massive winter storms across the US, according to data compiled by Bloomberg.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.The software names that do come to market have been floundering, as appetite continues to wane. Planview Inc.’s effort to refinance its existing debt with private credit faltered recently, even after it dangled a hefty interest rate to sweeten the deal. Before that, Thoma Bravo’s Sophos saw its $2.5 billion deal snubbed by private lenders.Instead, direct lenders are focused on financing anything but. Last week, Ares Management Corp. was eyeing a $2 billion deal to finance an acquisition for MedImpact Healthcare Systems, a pharmacy-benefits manager. In July, Blackstone Inc. led a $400 million private loan for the buyout of HVAC firm Integra Testing Services.That said, software still comprises a significant portion of private credit funds, even as lenders try to reduce their exposure. At Blue Owl Capital Corp., software makes up 18% of its $15 billion portfolio, its largest single sector exposure. The industry also represented about 19% of Blackstone Secured Lending Fund, down from 21% in the prior quarter.“We’re going to continue to be cautious around software,” Blue Owl Co-President Craig Packer said last week on an earnings call. “It’s an area that’s moving quickly, and we’re going to continue to be cautious about deployment.”Still, the firm said its existing book of software loans remains one of its best-performing segments.Ares earlier this year was preparing for tough conversations with sponsors of software firms about refinancing their debt, and hired an outside consultant to examine its total exposure to the sector.As the “anything but software” mantra takes hold at some firms, others see a strategic edge in bucking the trend. There may be “compelling opportunities in this vertical as some lenders with large software portfolios are avoiding this sector entirely,” Barings BDC Inc. President Matthew Freund told investors on an earnings call last week.Apollo Global Management Inc. is providing $2.6 billion of financing to the owners of the New York Yankees, the private capital giant’s largest investment to date in US sportsUS investment giants including Apollo, Blackstone, BlackRock Inc. and Brookfield Asset Management are partnering with Nvidia Corp. to source $500 billion in financing for AI infrastructureAres Management is leading a $2.2 billion direct loan to help finance a healthcare services acquisition, in one of the biggest deals since the private credit market was roiled by record redemptions this yearFlexible workspace provider The Executive Centre is seeking a $500 million loan to refinance existing debt and fund capital expenditureLondon-based buyout firm TDR Capital is considering a sale of British private credit manager Arrow GlobalBlue Owl Capital Inc. sold $750 million of high-grade debt, up from initial discussions of $500 million, after receiving a large amount of investor ordersCanada’s Polar Asset Management Partners Inc. received more than $215 million in commitments for the first close of a fund that will invest in significant risk transfer dealsTurkiye Is Bankasi AS CEO Hakan Aran will step down at the end of this month and be replaced by deputy chief Hasan Cahit CinarToronto-Dominion Bank’s US credit trading unit is ramping up its push in leveraged finance business with the hiring of Eric TiedekenJane Street Prices $14.6 Billion Debt Deal With 8% 10-Year YieldGoldman Sachs’ Private Credit Fund Co-CEO David Miller to ResignBenefit Street Says Investors Keeping Score on Bad PIK Debt—With assistance from Rene Ismail.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. 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