Thoma Bravo has agreed to hand over troubled software company Medallia to a consortium of lenders led by Blackstone, in one of the largest restructurings in the history of the private credit market.
The transaction will see Thoma Bravo lose all of the approximately $5 billion it invested in Medallia in a take-private deal in 2021.
The lender group, which includes Apollo and KKR, will inject $150 million of new capital into Medallia and significantly reduce its outstanding debt, in a bid to turn the company’s fortunes around.
The new capital will be used to “accelerate AI-driven innovation and customer-focused product investment,” Medallia said in a statement.
Thoma Bravo acquired Medallia in 2021, at the height of the software boom, in a $6.4 billion deal financed with around $2 billion in debt, in the form of an annual recurring revenue (ARR) loan.
The loan quickly ran into trouble following the Federal Reserve’s rate hiking cycle in 2022, causing its interest burden to increase significantly, and Medallia opted to service its debt through heavy payment-in-kind (PIK) usage.
Despite this, the firm’s lenders continued to mark the loan near par until late 2024, when the lender group amended the loan, reducing the PIK component and increasing the interest rate.
Late last year, the lender group reportedly refused to allow the firm to extend its PIK facility, demanding 100% cash interest payment.
The decision meant that the firm’s interest burden became greater than its annual earnings, forcing the restructuring.
The loan’s marks initially steadily decreased, before falling sharply in the past two quarters to an average of 61.2 cents on the dollar, according to our analysis of SEC filings.
As of the end of Q1, Medallia’s debt was held by nine BDCs. Blackstone’s flagship non-traded BDC, Blackstone Private Credit Fund, held the largest exposure, with more than $1.1 billion in par value.
In addition to Blackstone, Apollo and KKR, the firm’s debt was held by Antares, HPS Investment Partners, Monroe Capital and Onex Credit.
Software lenders under pressure
While largely expected, Medallia’s restructuring comes as another blow to the private credit sector, which has suffered significant redemption pressure in 2026 owing to concerns around credit quality in software loans. In the first quarter, the largest non-traded BDCs averaged 12.1% in redemption requests, well above the 5% at which they can gate withdrawals.
Funds with heavy exposure to software and ARR loans were hit particularly hard: Blue Owl’s Technology Income Corporation (OTIC) received redemption requests amounting to almost 41% of its net asset value.
Elevated redemptions have continued into Q2, with Blackstone and HPS both gating withdrawals earlier this month.
