Blackstone is leading a group of private credit lenders, including Apollo and KKR, in discussions over the future of Medallia, as the software company faces rising debt costs and potential restructuring, according to a report by Bloomberg.

The lender group has opted not to extend further payment-in-kind flexibility, shifting Medallia to full cash interest payments and increasing annual debt servicing costs by approximately $100m to nearly $300m.

The move reflects a more disciplined approach from private credit investors, as lenders reassess risk and capital allocation in a higher-rate environment.

Medallia, which was taken private by Thoma Bravo in a $6.4bn deal in 2021, now carries close to $3bn in debt, with servicing costs exceeding its roughly $200m in annual earnings.

Blackstone, which holds the largest share of the loan at around $1.5bn, is driving restructuring discussions, highlighting the firm’s central role in managing complex credit situations.

Lenders are considering multiple outcomes, including a debt-for-equity swap that could see control of the company shift, or a fresh equity injection from Thoma Bravo.

The situation underscores private credit’s growing influence in corporate restructurings, particularly in transactions structured during the low-rate environment.

While Medallia has achieved double-digit revenue growth, its inability to generate consistent profitability has weighed on its capital structure.

The financing was originally structured using annual recurring revenue metrics, reflecting broader market trends during the buyout cycle, but exposing lenders to execution risk.

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