Debt investors are selling off exposure to software companies, a sign of increasing pain for the sector. Jim Egan, co-head of securitized products research at Morgan Stanley, said that CLOs have lower exposure to riskier companies, which are "CCC" rated, compared to a year ago. The software and services sector accounts for about 15% of the collateral in currently outstanding syndicated CLO deals in the US. Software exposure in direct lending is estimated to be about 19% based on private-credit focused CLOs. Investment-grade notes and high-yield leveraged loans of some software makers, including Intuit, Dayforce, and Citrix, were sold between 89 cents and 98 cents on the dollar in late February and earlier March. While spreads across the software industry have widened, the spread on Intuit's investment-grade bond that matures in 2033 is largely in line with the level at which it was issued in 2023.