Key Takeaways
- • Blackstone-led lenders have restructured $2.8 billion in Medallia debt into a debt-for-equity swap, gaining majority control of the customer service software company and effectively wiping out Thoma Bravo's $5.1 billion equity investment.
- • Thoma Bravo acquired Medallia for $6.4 billion but significantly overestimated the company's growth trajectory, leading to the default on approximately $3 billion in debt obligations.
- • The restructuring involves multiple major private credit players—Blackstone, KKR, and Apollo Global Management—negotiating control from the original private equity sponsor, representing a landmark credit event in the private markets.
- • Blackstone marked down the value of its Medallia loan position to 60 cents on the dollar as of Q1 2026, reflecting the deterioration in the underlying asset and signaling stress in the broader private credit market.
- • The transaction, advised by Kirkland & Ellis for Medallia and Latham & Watkins for lenders, represents a full ownership transfer and marks a significant loss for Thoma Bravo's limited partners.
Summary
A consortium of private credit lenders led by Blackstone has moved to take control of Medallia, a customer service software company, through a debt-for-equity restructuring of approximately $2.8 billion in outstanding debt. The transaction effectively eliminates the $5.1 billion equity position held by Thoma Bravo and its co-investors, who originally acquired the company for $6.4 billion. Multiple sources confirm that Blackstone, alongside KKR and Apollo Global Management, has negotiated majority ownership control following Medallia's default on roughly $3 billion of its debt obligations.
The credit deterioration at Medallia stems from a fundamental overestimation of the company's growth rates by Thoma Bravo during the acquisition process. Thoma Bravo's leadership acknowledged in recent discussions that the firm had projected growth trajectories that failed to materialize, creating a significant gap between original underwriting assumptions and actual business performance. This misjudgment triggered the debt default that precipitated the lender takeover.
Blackstone's exposure to the transaction is substantial and has weighed on its portfolio values. The firm marked down its Medallia loan position to 60 cents on the dollar at the end of Q1 2026, based on filings related to its business development company (BDC) vehicles. This markdown reflects the diminished credit quality of the asset and the anticipated resolution through the debt-for-equity conversion, which transfers ownership but reduces the stated value of the lenders' security.
The restructuring represents one of the largest private credit enforcement events in recent years, signaling broader stress within the software sector and the private markets more generally. The transaction has been ongoing since early 2026, with lenders refusing to extend additional capital support to Medallia, forcing the ownership transition. Both Medallia and the lending consortium have retained legal counsel—Kirkland & Ellis representing the company and Latham & Watkins advising the lenders—to execute the debt-for-equity swap and complete the transition of control.
This outcome underscores the risks inherent in large leveraged acquisitions during periods of elevated valuations and growth assumptions, and demonstrates how private credit lenders are increasingly willing to enforce their positions when underlying business performance deteriorates materially.
The credit deterioration at Medallia stems from a fundamental overestimation of the company's growth rates by Thoma Bravo during the acquisition process. Thoma Bravo's leadership acknowledged in recent discussions that the firm had projected growth trajectories that failed to materialize, creating a significant gap between original underwriting assumptions and actual business performance. This misjudgment triggered the debt default that precipitated the lender takeover.
Blackstone's exposure to the transaction is substantial and has weighed on its portfolio values. The firm marked down its Medallia loan position to 60 cents on the dollar at the end of Q1 2026, based on filings related to its business development company (BDC) vehicles. This markdown reflects the diminished credit quality of the asset and the anticipated resolution through the debt-for-equity conversion, which transfers ownership but reduces the stated value of the lenders' security.
The restructuring represents one of the largest private credit enforcement events in recent years, signaling broader stress within the software sector and the private markets more generally. The transaction has been ongoing since early 2026, with lenders refusing to extend additional capital support to Medallia, forcing the ownership transition. Both Medallia and the lending consortium have retained legal counsel—Kirkland & Ellis representing the company and Latham & Watkins advising the lenders—to execute the debt-for-equity swap and complete the transition of control.
This outcome underscores the risks inherent in large leveraged acquisitions during periods of elevated valuations and growth assumptions, and demonstrates how private credit lenders are increasingly willing to enforce their positions when underlying business performance deteriorates materially.
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