Thoma Bravo Nears Agreement to Transfer Medallia to Creditors

Private Equity Firm Thoma Bravo Nears Agreement to Hand Over Medallia to Lenders

New York, April 22 (Reuters) - Thoma Bravo, a private equity firm, is close to finalizing a deal that will transfer software company Medallia to its lenders, marking the end of months-long restructuring negotiations. The move is expected to eliminate $5.1 billion in equity for Thoma Bravo and its co-investors, who acquired Medallia for $6.4 billion in 2021.

Medallia, a customer service software company, has struggled in recent months due to its substantial debt of $3 billion, which it owes to several major financial institutions, including Blackstone, KKR, Apollo Global, and Antares Capital. Thoma Bravo, Blackstone, and KKR have declined to comment on the matter. Apollo and Medallia have not responded to requests for comment.

Medallia's valuation has been negatively impacted in recent months due to concerns that its services will eventually be replaced by artificial intelligence. The company provides software that collects and analyzes customer and employee feedback for businesses. Private equity firms heavily invested in the software sector when interest rates were low following the peak of the COVID-19 pandemic. However, investors have become increasingly concerned about the sustainability of high valuations assigned to some assets and the debt raised to acquire them.

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The debt in Medallia's case is held by several major financial institutions, including Blackstone, KKR, and Ares Capital Corp, which also hold some of the debt in traded and non-traded funds. The marked-down value of the debt, as reported by FS KKR Capital Corp and Apollo Debt Solutions, stands at 79 cents and 74 cents, respectively, while Ares Capital marked the loan at par.