Thoma Bravo appears poised to hand customer experience software provider Medallia over to its creditors, a restructuring that would effectively wipe out about $5.1 billion of equity in the company. The deal would place control of Medallia in the hands of several lenders that together hold approximately $3 billion of Medallia debt, among them Blackstone, KKR, Apollo Global, and Antares Capital.
The outcome represents a notable setback for a wave of private equity investments made during the post-pandemic buyout expansion, when firms deployed large sums into software companies supported by relatively cheap borrowing costs. Thoma Bravo acquired Medallia in 2021 for $6.4 billion, a bet tied to the customer experience software market during a period of near-zero interest rates.
Creditors have already marked down the loans backing Medallia substantially. In its most recent quarterly report, FS KKR Capital Corp valued the debt at 79 cents on the dollar, while Apollo Debt Solutions placed a valuation of 74 cents on the dollar. In February, Blackstones global head of private credit Brad Marshall described Medallia as "underperforming, not because of anything related to AI, but due to what we believe to be execution-driven issues."
The Medallia situation has emerged amid what market participants describe as the most severe stress test for private credit since the asset class expanded rapidly. Publicly traded business development companies, or BDCs, are trading at the widest discounts to net asset value in over five and a half years. At the end of March the median price-to-forward 12-month NAV ratio across BDCs stood at about 0.74, implying roughly a 26% discount and the broadest gap since October 2020.
Software exposure in private credit portfolios is a particular source of concern. Ratings firm Moodys observed that publicly traded BDCs with substantial software exposure have seen share prices tumble well below net asset value, which has limited their financial flexibility and their ability to raise new equity capital. As of February 2026, distressed software loans in the private credit market totaled $46.9 billion.
Investors are also demanding higher compensation to provide financing to private credit vehicles. The premium required to lend to these vehicles rose by 0.34 percentage points since the start of 2026 and by 0.83 percentage points since early 2025, reflecting greater apprehension about portfolio credit quality. Issuance activity has slowed: BDCs sold about $6.8 billion of bonds in the first quarter of 2026, a decline of roughly 22% year-on-year.
The fallout has affected public equity benchmarks tied to software as well. The Software Sector ETF (NYSE:IGV) has fallen about 27% over the past six months, although it registered a modest rebound over the most recent week.
The Medallia development also contrasts with public comments from Thoma Bravos CEO Orlando Bravo earlier this month. Speaking about the so-called "SaaSpocalypse," he said he remained optimistic about software-as-a-service companies that dominate niche markets and can effectively employ AI, arguing that the market environment creates some of the most compelling buying opportunities.
For market participants, the Medallia restructuring is a concentrated example of broader pressures on private equity and private credit portfolios that have meaningful software exposure. Lenders, BDCs, and public investors in software-linked instruments have all experienced valuation and liquidity challenges as concerns over execution, credit quality, and capital access have grown.