(Bloomberg) — Doubt is mushrooming about NSO Group Ltd.’s ability to pay its debts after the U.S. blacklisted the Israeli spyware company and its newly named chief executive quit.
A loan with a face value of over $300 million that NSO issued in 2019 was quoted by traders on Friday at an all-time low bid of 70 cents on the dollar, placing the debt firmly into distressed territory, according to people familiar with the trading. They asked not to be named when discussing private information.
The quote was shared with market participants by Jefferies Financial Group Inc., which serves as administrative agent on the loan and was the lead underwriter when the debt was first marketed to investors.
Friday’s drop follows reports on Wednesday that NSO’s incoming chief executive Isaac Benbenisti, who had been co-president, resigned after the U.S. Commerce Department placed NSO on its export blacklist, citing the sale of hacking tools to foreign governments. Debt markets in the U.S. were closed on Thursday in observance of Veterans Day.
NSO co-founder Shalev Hulio, who was to be succeeded by Benbenisti, will instead remain in the role “to provide stability and continuity to the company,” a spokesperson for NSO said in a statement.
“While we are dealing with new challenges, we are confident we will get through them,” the spokesperson said in the statement. “We are working in all appropriate channels to reverse the Department of Commerce’s decision, and we are in constant communication with all the financial stakeholders that are relevant to the company.”
Read more: U.S. Blacklists NSO Group, Other Firms Over Cyber Acts
Jefferies declined to comment.
NSO has been marred by allegations that its Pegasus spyware was used by governments to hack into the phones of political dissidents, journalists and human rights activists. The company has denied the allegations and said its technology helps prevent terrorism and crimes.
Read more: How Pegasus Took Spyware’s Potency to a New Level: QuickTake
NSO’s debt, which also includes a smaller loan denominated in euros, has been under pressure after a group of news organizations published dozens of stories alleging widespread misuse of the software.
The debt became a thorn in the side for Jefferies and Credit Suisse Group AG after a 2019 management-led buyout, when concerns over the company and its technology forced the banks to briefly take the loans on their books and later offload them to investors at a steep discount.
(Adds comment from NSO starting in fifth paragraph.)
©2021 Bloomberg L.P.