Private Credit Lenders Encourage Forced Sales for Distressed Software Companies Amid Refinancing Struggles

By Ayse Kelce

Software companies in the private credit market are dealing with the aftermath of the SaaSpocalypse. Sponsors are being forced to sell the companies that fail to find ways to extend debt maturities, according to Eugene Lee, managing director at Lincoln International.

“We’re starting to see more signs of stress within software private credit. It’s not clear that lenders want to end up owning these companies, so we’re starting to see more lender-driven sales,” Lee said, adding, “I think what we’re seeing is this trend is turning into lenders saying, ‘You know what? We don’t want to own it; just sell it.’”

While software has been topical across the board, stress is observed across sectors in private credit.

“Foreclosures, which are lenders taking the keys from sponsors on a consensual basis, are expected to double this year again [year over year],” Lee said, referring to the entirety of the private credit market.

Foreclosures tracked by Lincoln International were already at over $22 billion through June this year, and the number is expected to get closer to $50 billion by the end of 2026. Private credit foreclosures totaled $24.1 billion in 2025, according to Lincoln International data.

The foreclosure data does not include any amend-and-extend or kicking-the-can transactions. And, importantly, it does not include forced sale processes, which have been on the rise, according to Lee.

Software, without a doubt, has been one of the most topical sectors this year for public and private investors due to worries about AI’s ability to make some of those companies obsolete, causing trading volatility and valuation changes.

Public markets have been skeptical of software refinancings following the SaaSpocalypse earlier this year. Only a handful of software companies were able to successfully extend maturities so far, including Gainwell Technologies, The Knot Worldwide and Sophos, with most instances being only A&E transactions instead of true refinancings.

Rocket Software and Internet Brands are currently gauging investor interest to see if they can test the public market soon, Octus reported.

Similarly, regular-way refinancing activity still has not picked up for software companies in the private credit market, according to Lee, who added that the amendments and kick-the-can transactions continue to push maturities away.

“Most of the software companies that we see don’t have cash flow issues. Revenues and EBITDA are growing as a cohort. And while there is AI risk, it’s still farther away and for the most part has not impacted near-term financials,” Lee said.

Maturities are starting to become an issue, however, particularly for the 2021-2022 vintage of software buyouts.

Among these software companies, higher-quality assets continue to attract buyers while the environment remains very challenging for lower-quality assets, according to Lee.

“The real problem is that the multiples have come down 200, 300 or 400 bps and lenders all lend based in large part on loan to value. So all of a sudden, your 30% loan to value loan is now 50% or more,” Lee said. “The loan may not be refinancable in these markets, but the company is still generating cash flow. There will be significant problems if multiples contract to the high-single-digit range from the mid-teens range.”
 

The Bankruptcy Quarterly

The latest edition of The Bankruptcy Quarterly reviewing the third quarter of 2026 is out. The article covers developments in bankruptcy law over the last three months and data-based insights into companies that filed for chapter 11 or confirmed a chapter 11 plan during the quarter. Highlights include Judge Christopher Lopez’s decision to deny confirmation of the First Brands liquidation plan, and major opinions in QVC, SVB and chapter 15 cases. Read the Bankruptcy Quarterly HERE.
 

B&G Foods

The publicly owned packaged food maker is weighing a sale of its spices & flavor solutions segment to boost liquidity and delever its balance sheet, while its 11% senior unsecured notes due 2031, priced in June, trade at an average 72.99 versus 97.5 at issue. The company and Nortera Foods terminated the Green Giant Canada sale, which management had expected to cut leverage by 0.25x, on Oct. 5 after Canada’s Competition Act approval was not obtained by the Sept. 24 outside date. The company’s second-quarter net sales fell 9.7% to $383.3 million while adjusted EBITDA rose 4.2% to $60.4 million, leaving net leverage at 7.2x with $671.2 million of liquidity. Octus’ coverage of B&G Foods is HERE.

Precisely Software

Lenders to the Clearlake Capital and TA Associates-backed software company have signed a Milbank-prepared cooperation agreement with the group calling for pro-rata treatment and open to new joiners. The company faces more than $3.3 billion of debt maturing in 2028 and 2029 and struggled to refinance in the private credit market this summer. The sponsors have not engaged with lenders since. The second lien term loan due 2029 averages 47.5, down from 62.7 a month ago. Octus’ coverage of Precisely Software is HERE.

Symplr Software

The healthcare software provider, backed by Clearlake Capital and Charlesbank Capital Partners, is pursuing a liability management exercise uniquely led by second lien lenders. In broad terms, the proposed LME includes $278 million of new money, including $103.5 million of new second lien first-out loans due March 2031 and up to $174.5 million of sponsor-funded Series D preferred equity. First lien lenders would exchange at par into second-out loans due December 2030 with a 100 bps coupon bump and a 50 bps PIK consent fee. Simpson Thacher and Greenhill advise the company, while an ad hoc group is represented by Gibson Dunn and Houlihan Lokey. Octus’ coverage of Symplr Software is HERE.

EyeCare Partners

The Partners Group-backed eye care provider agreed to sell its optometry business to MyEyeDr. for $635 million, using proceeds to fully repay its $275 million 2028 first-out term loan. In tandem, it launched a par exchange of its $1.57 billion second-out term loan into new debt maturing in May 2029, backed by lenders holding about 81% of the tranche. Lenders can declare a default under the newly issued debt if the company fails to sell its ophthalmology business within 12 to 18 months.

The lenders have set several milestones for the sale including identifying a first round of buyer rounds by Oct. 30. The sooner the company sells the business, the higher discount it captures in its debt paydown, with a discount of 25 cents on the dollar if it closes by year-end falling to 12.5 cents by the third quarter of 2027. Guggenheim Securities and CapM Advisors advised on the sale with Kirkland & Ellis as legal counsel, while Centerview Partners, Moelis & Co., Gibson Dunn and Davis Polk provided financial and legal advisory support across the exchange transaction. Octus’ coverage of EyeCare Partners is HERE.

U.S. Renal Care

The Bain Capital-backed dialysis provider paused a Barclays-led refinancing of its $1.25 billion term loan due 2028 and $400 million term loan due 2030 as it awaits the Centers for Medicare & Medicaid Services’ final 2027 payment rules on phosphate binders. The company was offering 9% interest on the new debt, but creditors wanted wider pricing. The company cited positive business developments, including the execution of several key new contracts, as a reason for the pause. Octus’ coverage of U.S. Renal Care is HERE.

Selecta Group

The vending machine retailer amended the indenture on its first-out notes with majority holder consent to pay the coupon for the March 1 to Sept. 1 period in kind after missing the Sept. 1 cash payment date and entering a 30-day grace period. Pursuant to the amendment, any interest payable on the defaulted interest arising from the March 1 to Sept. 1 period shall be payable entirely in PIK while the interest accruing from Sept. 1 to Dec. 1 will be paid on Dec. 1 and the interest accruing from Dec. 1 to March 1, 2027, will be paid March 1. The first-out notes, which arose from a 2025 LME, trade at 47.1, and for the first 12 months following issuance, amendments to sacred right/economic terms can be made with the consent of just 50% in principal amount of the first-out notes. The excluded lenders’ antitrust suit challenging the transaction remains in settlement talks, with a status report due Tuesday, Oct. 13. Greenhill advises the company, while certain noteholders work with Gibson Dunn. Octus’ coverage of Selecta Group is HERE.

Dave & Buster’s

The entertainment and dining operator canceled its planned appearance at Deutsche Bank’s leveraged finance conference while its term loans slid further into distressed territory. The SOFR+325 bps term loan B due 2029 was quoted at 64/66, down from 80/82 in mid-September, and the 2031 tranche at 58.6/60.3. Second-quarter adjusted EBITDA fell about 24% to $98.9 million with margins down 510 bps to 18.2%, although management attributed roughly half of the decline to non-normalized items. Management guided 2027 net capital expenditure to at or below $150 million, down sharply from $270 million in 2025, with the company ending the quarter with $492.1 million of liquidity. Octus’ coverage of Dave & Buster’s is HERE.

Radiology Partners

The physician services provider closed a $62 million equity raise in the third quarter, the second closing of an equity financing first reported in August when the company raised $225 million to fund AI investments and growth. Moody’s said this week the add-on equity does not affect its ratings on Radiology Partners’ $485 million incremental term loan, which alongside about $180 million of cash will be used to fund the acquisition of Everlight Radiology. Octus’ coverage of Radiology Partners is HERE.
 

Heritage Grocers Group

The Apollo Global Management-backed specialty food retailer is working with Latham & Watkins as legal advisor as certain lenders to the company are in the process of signing nondisclosure agreements and preparing to go restricted. PJT Partners advises the company, while some lenders are advised by Gibson Dunn and Evercore. According to a Reuters report last October, the sponsor was said to be exploring a sale of the company for about $1.5 billion, although market participants are concerned that headwinds the company is facing may thwart such a sale. Octus’ coverage of Heritage Grocers Group is HERE.

Cogent Communications

Cogent is working with Latham & Watkins as legal counsel as it struggles to refinance its June 2027 bonds. The company had been working with Bank of America but is no longer working with them for refinancing efforts. An ad hoc group of Cogent’s creditors recently started working with Houlihan Lokey. The publicly owned fiber network operator’s $600 million 6.5% senior secured notes due July 2032 have fallen to 70.7 from the high 90s in mid-August as the company struggles to refinance its June 2027 notes. Octus’ coverage of Cogent Communications is HERE.
 

Genesis Healthcare

Judge Stacey Jernigan approved the Genesis Healthcare debtors’ motion to approve amendments to their $996 million all-asset purchase agreement with 101 West State Street, or WSSH, at a hearing on Thursday. The debtors said they are working to close the transaction today and clear the path for the court to confirm the plan at a hearing next Tuesday, Oct. 13. Octus’ Genesis Healthcare coverage is HERE.

DISH Wireless

Judge Marvin Isgur has been appointed mediator in the DISH Wireless cases after the debtors announced that a two-week litigation standstill had not produced a settlement with the official committee of unsecured creditors or tower claimants asserting about $8 billion in claims. Amid warnings of low liquidity and likely administrative insolvency, the debtors also asked the court to authorize their investment banker FTI Capital Advisors to canvass the market for DIP financing. At an Oct. 2 status conference, the debtors said parent EchoStar was in talks with the special board committee to provide DIP funding. Octus’ EchoStar coverage is HERE.

Bernard L. Madoff Investment Securities / Bankruptcy Industry Update

On Monday, the U.S. Supreme Court denied certiorari in Fairfield Sentry’s appeal of the Second Circuit’s Aug. 5, 2025, ruling that section 546(e) of the Bankruptcy Code bars the liquidators’ British Virgin Islands constructive trust claims against investors who redeemed from the Madoff feeder funds. This would appear to effectively end the liquidators’ effort to recover more than $6 billion in redemption payments.

Bankruptcy Code section 546(e) provides a “safe harbor” for financial market transactions by prohibiting a debtor or trustee from avoiding prepetition settlement payments, margin payments or transfers made in connection with securities or commodity contracts involving financial institutions, unless the transfer was made with an actual intent to defraud. The Supreme Court order leaves in place a Second Circuit decision barring the liquidators’ claims. Octus’ Madoff coverage is HERE.
 

Supreme Court Climate Change Litigation

The U.S. Supreme Court on Oct. 5 heard arguments on whether federal law bars state-law claims against fossil fuel producers related to local harms allegedly caused by global climate change. The jurisdiction question could end the Supreme Court’s consideration of the case before the justices reach the merits. Dozens of suits have been filed at the federal, state and local level against legacy fossil fuel producers that seek billions in damages. Octus’ coverage is HERE.

FCC Broadcaster Ownership Deregulation

Cable industry trade groups associations petitioned the Federal Communications Commission to stay its order formally repealing the 39% national broadcast television ownership cap and said they will challenge the rule in court once the order is published in the Federal Register. Although the deregulatory move has been lauded by the broadcaster industry, other trade associations for distributors and nonprofits have also signaled their intent to challenge the cap. Octus’ coverage is HERE.