Key Takeaways
- • Software's share of PE-backed direct lending volume fell to 15% so far in 2026 from 22% last year and a 27% peak in 2020 and 2022, according to LCD estimates cited by Morningstar, while deal count share dropped to 12% from 16%.
- • Private credit lenders are pickier on software after AI-driven fears, sparked in the first quarter by Anthropic's Claude Cowork launch, raised concerns about the durability of SaaS subscription revenue.
- • Financing is still available for software credits with lower leverage, higher pricing, or a credible AI-positioning narrative, with Brookfield's proposed Actimize carveout (about $800 million potential financing) cited as an example.
- • Borrowers are increasingly using amend-and-extend transactions with incumbent lenders, including Sophos ($1.66 billion and €450 million first-lien), Proofpoint ($4.3 billion) and Imprivata (about $1.2 billion).
- • Billions of software loans held in BDCs mature in 2027 and 2028, so refinancing and restructuring pressure is likely to continue.
Summary
Private credit software lending has become harder to place, according to Morningstar, which cites market sources saying 2026 software deals have typically been refinancings and extensions led by incumbent lenders, and that new lenders are reluctant to take on legacy software credits. Per LCD data, software accounted for 12% of PE-backed direct lending deals by count so far in 2026, down from 16% last year, and 15% of PE-backed direct lending volume, down from 22% last year and a peak of 27% in 2020 and 2022. Banks have had to tap dozens of lenders to finance software borrowers that once had abundant access to capital.
The shift follows a period in which direct lenders heavily deployed capital into software, particularly after 2021's low-rate buyout boom. Morningstar reports that AI-related concerns intensified in the first quarter after the launch of Anthropic's Claude Cowork, which raised investor fears that AI tools could enable bespoke software and erode subscription revenue at SaaS companies. Some software loans in lender portfolios are reported to be stressed.
Financing remains available for select credits. Brookfield's proposed carveout of compliance software business Actimize from NICE could attract about $800 million of private credit financing; terms are not final, and lenders are reportedly viewing financial compliance as more resilient to AI disruption. Comvest provided a $350 million loan to Calero to refinance debt from incumbent lenders MidCap and Golub, priced at S+650, which Morningstar says was compelling enough for some lenders despite doubts about the expense management software's resilience to AI. Permira's merger of Highspot and Seismic drew more than $600 million in financing at S+475, led by PNC, with initial ARR covenants that convert to cash flow covenants, a structure Morningstar describes as reminiscent of the easy-credit era.
Many private credit providers are focusing on existing portfolio companies rather than new deals. PE-backed software borrowers have also pursued amend-and-extends: Thoma Bravo-backed Sophos completed a cross-border A&E extending first-lien maturities on $1.66 billion and €450 million, after a private credit refinancing talks fell through; Proofpoint extended $4.3 billion of first-lien term loan maturities in July; and Imprivata extended about $1.2 billion of first-lien debt earlier in the summer. Morningstar notes that billions of software loans held in BDCs mature in 2027 and 2028, and that refinancing and exit options will vary by subsector and leverage, with further restructurings possible.
The shift follows a period in which direct lenders heavily deployed capital into software, particularly after 2021's low-rate buyout boom. Morningstar reports that AI-related concerns intensified in the first quarter after the launch of Anthropic's Claude Cowork, which raised investor fears that AI tools could enable bespoke software and erode subscription revenue at SaaS companies. Some software loans in lender portfolios are reported to be stressed.
Financing remains available for select credits. Brookfield's proposed carveout of compliance software business Actimize from NICE could attract about $800 million of private credit financing; terms are not final, and lenders are reportedly viewing financial compliance as more resilient to AI disruption. Comvest provided a $350 million loan to Calero to refinance debt from incumbent lenders MidCap and Golub, priced at S+650, which Morningstar says was compelling enough for some lenders despite doubts about the expense management software's resilience to AI. Permira's merger of Highspot and Seismic drew more than $600 million in financing at S+475, led by PNC, with initial ARR covenants that convert to cash flow covenants, a structure Morningstar describes as reminiscent of the easy-credit era.
Many private credit providers are focusing on existing portfolio companies rather than new deals. PE-backed software borrowers have also pursued amend-and-extends: Thoma Bravo-backed Sophos completed a cross-border A&E extending first-lien maturities on $1.66 billion and €450 million, after a private credit refinancing talks fell through; Proofpoint extended $4.3 billion of first-lien term loan maturities in July; and Imprivata extended about $1.2 billion of first-lien debt earlier in the summer. Morningstar notes that billions of software loans held in BDCs mature in 2027 and 2028, and that refinancing and exit options will vary by subsector and leverage, with further restructurings possible.
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