for losses: some funds have marked Medallia-linked debt below face value, including FS KKR Capital Corp at about 79 cents on the dollar and Apollo Debt Solutions around 74 cents. Medallia still sells software that analyzes customer and employee feedback, but its valuation has been pressured as buyers debate how much artificial intelligence can automate parts of that work.
Why should I care?
For markets: Debt sits in front and it usually wins.
In a leveraged buyout – a purchase funded mostly with borrowed money – lenders get paid before shareholders. When a company stumbles, value can shift from equity to creditors fast, even if revenues hold up. The markdowns to 79 and 74 cents show how losses can land in private-credit funds and business development companies without any public-stock crash. If more software firms see slower growth or AI-driven pricing pressure, lenders will likely demand higher interest rates and stricter terms, lifting financing costs across the sector.
Zooming out: AI is changing what software is worth.
Software used to be valued mainly on growth and “stickiness” – how hard it is for customers to switch. Now investors also ask whether AI tools can copy key features or make them cheaper. That uncertainty makes heavy debt riskier for deals priced like it was still 2021, when money was cheap. For credit investors, even subscription cash flows can look less predictable when customers expect automation to do more of the job.
