--- title: "Billions in Loans from Giants Like Blackstone and Apollo Involved: Two Defaults Exacerbate U.S. Private Credit Dilemma" type: "News" locale: "en" url: "https://longbridge.com/en/news/284065131.md" description: "The U.S. private credit market is under heavy pressure. Giants such as Blackstone, KKR, and Apollo face over $4.4 billion in exposure due to defaults by software vendor Medallia and dental provider Affordable Care. High leverage and AI disruptions are accelerating default losses; Blackstone's flagship fund has hit a record non-performing loan ratio, sparking market fears that a 'SaaS apocalypse' could trigger a larger wave of defaults" datetime: "2026-04-25T01:34:48.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/284065131.md) - [en](https://longbridge.com/en/news/284065131.md) - [zh-HK](https://longbridge.com/zh-HK/news/284065131.md) --- # Billions in Loans from Giants Like Blackstone and Apollo Involved: Two Defaults Exacerbate U.S. Private Credit Dilemma The U.S. private credit market is facing a new round of stress tests. Software company Medallia and dental service provider Affordable Care have recently defaulted on loans, involving over $4.4 billion in exposure for private credit giants including Blackstone, KKR, and Apollo, further tightening an already strained corner of Wall Street rife with contradictions. According to media reports citing informed sources, **Medallia can no longer repay approximately $3 billion in loans.** Private equity owner Thoma Bravo recently informed its largest lender, Blackstone, that it will return control of the company to creditors. **In this 2021 acquisition, Thoma Bravo invested roughly $5.1 billion, which is now likely to be completely lost.** Meanwhile, institutions including Blackstone and KKR are also engaged in restructuring negotiations regarding Affordable Care's $1.4 billion loan. These two defaults have directly impacted the market. BCRED, Blackstone's largest private credit fund, disclosed this week that its non-performing loan ratio rose to a record 2.4% in the first quarter, against an $80.5 billion investment portfolio, citing Medallia and Affordable Care as primary causes. Blackstone CEO Stephen Schwarzman emphasized at an analyst conference call on Thursday that the fund has ample liquidity, yet Blackstone's stock still fell 6% that day. Currently, losses in private credit funds are accumulating at an accelerating pace. Individual investors have been accelerating their withdrawals from private credit funds since the beginning of the year, while concerns about the potential impact of artificial intelligence on the software industry have sparked fears of a larger wave of defaults. ## Medallia Default: The Cost of a $5.1 Billion Acquisition Medallia provides employee and customer feedback management software, and its troubles were foreshadowed even before the rise of the AI wave. In 2021, Thoma Bravo completed the acquisition of the company with high leverage. Subsequently, the Federal Reserve sharply raised interest rates in 2022, causing loan interest expenses to surge—a common challenge faced by many leveraged buyouts at the time. At the same time, Qualtrics, a competitor also under private equity ownership and itself deeply mired in financial distress, continued to erode Medallia's market share, putting pressure on sales performance. This year, specific clauses in the loan agreement became the trigger point. These clauses required Thoma Bravo to inject additional capital if Medallia failed to meet profit targets. Although Thoma Bravo had a funding window until the end of June, informed sources reveal that the company recently clearly informed Blackstone that it chose to return control of the company to creditors. Creditors have hired financial advisory firm Alvarez & Marsal to verify Medallia's financial condition, aiming to complete a restructuring out of court rather than filing for bankruptcy protection. According to media reports citing informed sources, **creditors are considering reducing Medallia's outstanding loan size to approximately $1 billion to $1.4 billion, equivalent to 5 to 7 times the company's approximately $200 million EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), while simultaneously acquiring 100% of the company's equity.** Regarding this costly failure, Thoma Bravo founder Orlando Bravo admitted on CNBC last month, "Medallia is a good company; we made a mistake that led us to pay too high a price." He also stated that other portfolio companies under his umbrella "performed exceptionally well." Thoma Bravo also sent positive signals at a recent investor meeting, indicating that the company can still identify acquisition opportunities and distinguish between enterprises that can be disrupted by AI and those that may benefit from it. ## Exposure and Responses from Major Institutions The two defaults have left clear marks on the books of multiple private credit institutions. Blackstone and KKR valued their Medallia loans at approximately 80 cents on the dollar in December last year, but this dropped sharply to 60 cents this month. Blackstone stated that the two troubled companies combined account for only about 1% of the fair value of the BCRED portfolio, and the related loans have been significantly impaired, "already reflected in performance results." **Blackstone also disclosed that distributable earnings grew 25% year-over-year in the first quarter, yet the stock still fell 6% that day.** For KKR, this restructuring will further increase the default rate of one of its flagship private credit funds, which has a scale of approximately $13 billion—the fund's default rate was already 5.5% as of December last year. In March this year, rating agency Moody's downgraded the fund to junk status citing poor performance. On the Apollo side, Co-President and Co-Head of Asset Management John Zito previously spoke bluntly about peer valuations. Reports indicate that during interactions with some investors, John Zito said, "I truly believe all valuations are wrong... I think private equity valuations are wrong." ## AI Disruption and Systemic Default Concerns Medallia's predicament reflects deeper structural risks within the private credit market. Multiple institutions have concentrated 20% or more of their fund assets in loans to software companies, and the rapid rise of artificial intelligence is posing disruptive challenges to the business models of some software enterprises. UBS analysts warned in a research report this month that **the impending "SaaS apocalypse" could double private credit default rates this year to between 9% and 10%.** Although fund management companies attribute the accelerated withdrawal of individual investors to irrational concerns fueled by media hype, and emphasize that their loan portfolios have low delinquency ratios, the reality of accelerating losses is changing market sentiment. Wells Fargo analyst Finian O'Shea stated, "Last quarter, we saw a lot of bad news continuing to worsen. Now, while things haven't worsened further, they haven't improved either—this state is likely to persist throughout the year, representing a slow bleed." Private credit institutions are also actively defining boundaries. Stephen Schwarzman emphasized that although defaults are rising, the funds hold sufficient cash and other resources to offset losses, and stressed the need to "distinguish facts from fiction." The industry as a whole also points out that compared to private equity firms that may lose their entire investments in defaults, the scale of losses on the credit side is relatively limited. However, with two large defaults now materializing one after another, investors and analysts are finding it increasingly difficult to ignore the pressure continuously building up in this corner of the market. ### Related Stocks - [APO.US](https://longbridge.com/en/quote/APO.US.md) - [BX.US](https://longbridge.com/en/quote/BX.US.md) - [BXMT.US](https://longbridge.com/en/quote/BXMT.US.md) - [KKR.US](https://longbridge.com/en/quote/KKR.US.md) - [XM.US](https://longbridge.com/en/quote/XM.US.md) - [MCO.US](https://longbridge.com/en/quote/MCO.US.md) - [UBS.US](https://longbridge.com/en/quote/UBS.US.md) - [WFC.US](https://longbridge.com/en/quote/WFC.US.md) - [APO-A.US](https://longbridge.com/en/quote/APO-A.US.md) - [APOS.US](https://longbridge.com/en/quote/APOS.US.md) - [KKRS.US](https://longbridge.com/en/quote/KKRS.US.md) - [KKR-D.US](https://longbridge.com/en/quote/KKR-D.US.md) - [KKRT.US](https://longbridge.com/en/quote/KKRT.US.md) - [WFC-D.US](https://longbridge.com/en/quote/WFC-D.US.md) - [WFC-L.US](https://longbridge.com/en/quote/WFC-L.US.md) - [WFC-Y.US](https://longbridge.com/en/quote/WFC-Y.US.md) - [WFC-C.US](https://longbridge.com/en/quote/WFC-C.US.md) - [WFC-Z.US](https://longbridge.com/en/quote/WFC-Z.US.md) - [WFC-A.US](https://longbridge.com/en/quote/WFC-A.US.md) ## Related News & Research - [Blackstone designed funds with credit cycles in mind, CEO says](https://longbridge.com/en/news/283844741.md) - [Private credit roundup: Thoma Bravo loses Medallia, Q1 earnings show pressure](https://longbridge.com/en/news/284001997.md) - [Blackstone Q1 revenue beats analysts estimates](https://longbridge.com/en/news/283819271.md) - [Does WestCX Orchestrate Launch Reveal a Deeper AI Infrastructure Ambition at Apollo Global Management (APO)?](https://longbridge.com/en/news/283920569.md) - [Blackstone's Private Credit Fund Slashes Value Of ACI Group Holdings](https://longbridge.com/en/news/283563199.md)