Key Takeaways
- • Non-accruals in Blackstone Private Credit Fund (BCRED) surged to 2.4% at cost in Q1 2026, up from 0.6% in Q4 2025, while fair value non-accruals rose to 1.4% from 0.4%, signaling increased credit stress in the $80.5 billion evergreen BDC.
- • Medallia and Affordable Care (ACI Group Holdings) drove the deterioration, with Medallia marked down to $0.60 from $0.78 per dollar and Affordable Care marked down to $0.70 from $0.80, both placed on non-accrual status in Q1.
- • Medallia's sponsor, Thoma Bravo, acknowledged overpaying for the software company in its 2021 $6.4 billion acquisition and the debt has been actively shopped by lenders seeking secondary market exits, indicating broader concerns about valuation and recoveries.
- • Affordable Care, a dental services organization backed by Harvest Partners since a 2021 acquisition for approximately $2.7 billion, was supported with over $1.4 billion in private credit financing led by KKR, highlighting leverage risks in the healthcare services sector.
- • Management stated the fund remains well-positioned to utilize Blackstone's resources to maximize shareholder recoveries, though the sharp quarterly increase in non-accruals reflects credit deterioration in software and healthcare verticals within the private credit portfolio.
Summary
Blackstone Private Credit Fund (BCRED), the world's largest evergreen private credit vehicle with $80.5 billion in assets, reported a material spike in non-performing loans during the first quarter of 2026. Non-accruals at cost climbed to 2.4% as of March 31, compared to 0.6% at the end of Q4 2025, while non-accruals measured at fair value rose to 1.4% from 0.4% over the same period, according to the fund's Form 8-K regulatory filing. This represents a fourfold increase in cost-basis non-accruals in a single quarter.
The deterioration was concentrated in two credits: software company Medallia and dental services operator Affordable Care (ACI Group Holdings). Medallia was marked down to $0.60 on the dollar from approximately $0.78 in the prior quarter, while Affordable Care was marked down to $0.70 from roughly $0.80. Both positions were placed on non-accrual status during Q1. Medallia was acquired by private equity sponsor Thoma Bravo in a $6.4 billion transaction in 2021, supported by a $1.8 billion recurring revenue loan. Thoma Bravo subsequently disclosed that it had overestimated Medallia's growth trajectory and paid an excessive price for the software business. Market sources indicate that lenders have been actively shopping Medallia's debt through secondary markets in an effort to offload positions.
Affordable Care's financial stress reflects broader pressures in the healthcare services sector. The dental services organization has been backed by Harvest Partners since 2021, when the firm acquired it from Berkshire Partners for an estimated $2.7 billion. The transaction was supported with over $1.4 billion in private credit financing, according to PitchBook data, with KKR serving as the agent on the original debt facility. The combination of significant leverage and operational headwinds has contributed to the markdown and non-accrual placement.
Despite the credit deterioration, BCRED management stated in its filing that the fund is "well-positioned to utilize Blackstone's resources and capabilities to seek to maximize recoveries for our shareholders." The sharp sequential increase in non-accruals underscores credit stress emerging in software and healthcare services segments of the private credit market, particularly among transactions financed during the 2020–2021 period when valuations were elevated and growth assumptions proved optimistic.
The deterioration was concentrated in two credits: software company Medallia and dental services operator Affordable Care (ACI Group Holdings). Medallia was marked down to $0.60 on the dollar from approximately $0.78 in the prior quarter, while Affordable Care was marked down to $0.70 from roughly $0.80. Both positions were placed on non-accrual status during Q1. Medallia was acquired by private equity sponsor Thoma Bravo in a $6.4 billion transaction in 2021, supported by a $1.8 billion recurring revenue loan. Thoma Bravo subsequently disclosed that it had overestimated Medallia's growth trajectory and paid an excessive price for the software business. Market sources indicate that lenders have been actively shopping Medallia's debt through secondary markets in an effort to offload positions.
Affordable Care's financial stress reflects broader pressures in the healthcare services sector. The dental services organization has been backed by Harvest Partners since 2021, when the firm acquired it from Berkshire Partners for an estimated $2.7 billion. The transaction was supported with over $1.4 billion in private credit financing, according to PitchBook data, with KKR serving as the agent on the original debt facility. The combination of significant leverage and operational headwinds has contributed to the markdown and non-accrual placement.
Despite the credit deterioration, BCRED management stated in its filing that the fund is "well-positioned to utilize Blackstone's resources and capabilities to seek to maximize recoveries for our shareholders." The sharp sequential increase in non-accruals underscores credit stress emerging in software and healthcare services segments of the private credit market, particularly among transactions financed during the 2020–2021 period when valuations were elevated and growth assumptions proved optimistic.
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