Carlyle Group and BlackRock are acquiring software loans at steep discounts, aiming to bolster returns from collateralized loan obligations (CLOs) as traditional bank loan sales surge. This move comes as CLO managers offload loans deemed vulnerable to AI disruption, squeezing market margins for over a year. Carlyle and BlackRock see software loans as a potential profit source, targeting companies in the tech sector where AI impacts are most pronounced.

Their purchases represent a strategic pivot for CLOs, seeking yield where traditional bank loan sales have become less attractive due to high supply and low demand. The buyers are betting on software companies' resilience or specific recovery prospects, aiming to capitalize on CLOs' inherent flexibility to hold diverse debt types.