Private Credit to Discover If ARR Loans Work Only in Bull Market

A particular kind of loan used to finance loss-making companies helped swell the $1.4 trillion private credit industry. Now comes a test of whether such financings were built solely for a bull market.

Annual recurring revenue (ARR) loans became popular last year as part of a flurry of private-equity takeovers in the software industry, where companies can be unprofitable for years as they spend cash to fuel growth. Among a surge in ARR transactions in 2022 was a $2.6 billion loan for Thoma Bravo LLC’s acquisition of Coupa Software Inc. and a $2.75 billion financing for the purchase of ...