Is Andrea Pignataro the next Patrick Drahi?
Software groups have been the biggest losers in global markets this year, as investors fear new AI tools will upend the sector.
Highly levered software businesses, which aggressive sponsors bought with other people’s money, have been hit hardest by the sell-off.
Their lenders — concerned that AI’s disruption could leave them on the hook for steep losses — are dumping investments quickly, causing bond and loan prices around the world to plummet.
In Europe, one junk bond issuer has borne quite a bit of the pain. It’s owned by a secretive Italian bond maven billionaire whose fintech empire underpins vital parts of trading of shares, debt and derivatives across the globe.
Andrea Pignataro, a maths wiz turned Salomon Brothers bond trader, launched Ion Group in 1999 before embarking on a two-decade-long debt-fuelled acquisition spree that has turned him into one of Italy’s richest men.
But in recent weeks credit investors have been dumping bonds issued by Ion, a roll-up of financial data companies including Mergermarket, Fidessa and Dealogic, as AI fears have swept across markets.
It has not helped Pignataro that he’s drawing comparisons to fellow European junk debt royalty Patrick Drahi, owner of the heavily indebted telecoms group Altice. For its part Ion is more than eight times levered with a $13bn debt pile. About $2.5bn of Ion’s financing is made of private credit at its holding company.
Drahi, a Franco-Israeli billionaire, is known for using aggressive tactics against creditors when finances are stretched. It’s a playbook that much of Europe’s high-yield market believes Pignataro would be willing to deploy.
As investors have sold out of Ion its bond prices have crashed, meaning some of its debt now pays a yield of more than 10 per cent.
The investors that dumped Ion’s debt will be feeling lucky. Some of their counterparts — higher up in Ion’s capital structure and further afield — don’t have that luxury.
Meanwhile, the AI threat trade is spreading across Wall Street.
Among the losers are also listed private credit funds that have built a large concentration of software company bets.
Shares of Blue Owl Technology Finance Corp, which has more than half of its loan book exposed to software companies, according to Barclays, had fallen about 11 per cent from the beginning of the year as of noon on Monday.
Financial data groups FactSet, S&P Global, Morningstar and the London Stock Exchange Group have also fallen sharply this year, while ratings agency Moody’s plunged on Tuesday.
DD reckons that while many investors are surely feeling the pain, the stock plunges are also allowing PE investors to ready new investments given the industry’s hundreds of billions of dollars in so-called dry powder.