Medallia Inc: Lenders To Take Control Of Company
Reprinted from the BDC Credit Reporter
Remains Rated CCR 4 And A Major Important Underperformer
Medallia, Inc., founded in 2001 by Borge Hald and Amy Pressman, is a privately held software-as-a-service (SaaS) company pioneering the experience management space, encompassing both customer and employee experience. Based in San Francisco, the company offers its flagship Medallia Experience Cloud, which collects feedback across digital channels—such as web, social media, mobile, and contact centers—and leverages AI-enabled analytics and workflows to help enterprises enhance loyalty, satisfaction, and business outcomes. Medallia serves clients across hospitality, retail, financial services, technology, and B2B sectors. Its operations fall under SIC code 7372 (Prepackaged Software). In 2021, the company was taken private in an all-cash acquisition valued at $6.4 billion by the private equity firm Thoma Bravo, which remains its owner. Click here for a Company Profile.
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This might well be the biggest BDC-related credit story of 2026. Reuters has reported the following:
In a previous article, the BDC Credit Reporter had warned, based on news reports, that such an outcome was likely. Now, the time seems to have arrived, and this will be a major development for Thomas Bravo, the Private Credit sector, and the BDC sector segment, and for the two public BDCs with material exposure to the troubled business.
To remind our readers, BDC's exposure to Medallia is huge: $1.9bn at cost, spread across 9 players – 6 non-traded and 3 public. Our interest is in the latter and especially in Blackstone Capital (BXSL) and FS-KKR Capital (FSK). The first BDC has advanced $393mn, and the second $233mn. To put that exposure into context, BXSL’s advances amount to 6.3% of its net assets and 4.0% of FSK’s. (However, the BDC with the most at risk is non-traded Blackstone Private Credit Fund, with $1.12bn invested, but may end up being less impacted given that this amounts to 2.4% of its huge capital base).
The coming debt-for-equity swap for this software company will likely re-ignite concerns in the press and the market about the impact of artificial intelligence on the creditworthiness of established businesses in this space. Parallels are likely to be drawn with what happened in 2024 to Pluralsight – another Thomas Bravo software-driven company, where the sponsor threw in the keys, and the lenders took control. Pluralsight has not fared all that well under its new stewards, with some of its debt recently placed on non-accrual.
BDC Credit Confidential
Given our focus, we are concerned that both BXSL and FSK will be materially writing down their stakes in the IQ 2026 from where they stood at the end of 2025. We estimate the potential loss booked at ($71mn) and ($42mn) respectively. This seems almost certain because we have heard that Blackstone Private Credit discounted its position from (78%) in the IVQ 2025 to (60%) in the IQ 2026. A similar reduction could cause both BXSL and FSK to show substantial unrealized losses for the first of 2026 as well. Just as important will be the likely loss of interest income. At max, if all debt gets converted to equity, ($61mn) of annual interest income will be forgone by the two public BDCs.BDC CREDIT CONFIDENTIAL
However, there are many unknowns, and even this news story may prove incorrect, as there is no official announcement as yet. If the debt-for-equity swap does occur, we’ll be interested to see how the BDCs value the business; whether they advance any new monies, and what proportion of capital will be in the form of debt and how much in equity. We’ll also be interested to see whether the lenders-now-owners allow the company to pay interest at a below-market rate and/or in part or in full in PIK. The answers to those questions will materially impact both public BDCs’ future financial performance for some time.
Till we learn more, Medallia remains rated CCR 4 for a little longer and a Major Important Underperformer. We expect to have much more to say when we get a fuller story.