Private Credit News Weekly Issue #95: The Short Sellers Arrive, the Maturity Wall Looms, and Europe Smells Blood
A new CDX index, $330 billion in tech debt coming due, and the quiet winners of a market in distress
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Something shifted this week that won’t shift back.
On Monday, S&P Global and a syndicate of banks including JPMorgan, Morgan Stanley, Goldman, Bank of America, Deutsche Bank and RBC launched the S&P CDX Financials Index, a credit default swap benchmark that allows investors to take direct positions on BDC credit risk for the first time.
About 12% of the index is tied to private debt funds managed by Apollo, Ares and Blackstone. Senior tranches of private credit CLOs have been widening. Deutsche Bank’s US distressed desk more than doubled its quarterly profit, booking over $100 million partly by shorting software company debt. Wall Street equity trading desks are on pace for an $18 billion quarter, the best on record, driven partly by private credit volatility.
The institutional infrastructure for expressing negative views on this market is now live.
That’s a different environment than the one that existed three months ago.
What the CDX Index Actually Means
The mechanics are straightforward. CDS written directly on BDCs, not proxy baskets of listed equities, not leveraged loan indices. Actual credit protection on the funds themselves. Barclays estimates BDCs will account for nearly 30% of the new index spread.
The more interesting detail is who got excluded.
Blue Owl was on the preliminary list and was pulled before launch. S&P’s Nicholas Godec said the firm checked Blue Owl’s spreads versus peers and “didn’t want the index at launch to be too idiosyncratic around a particular name.” In other words, Blue Owl was already trading so wide that including it would have skewed the entire index.
That’s not a technical footnote. That’s the market telling you something about where Blue Owl stands relative to its peers right now.
Robert Smalley at MacKay Shields put it plainly: “If this is seen as the proxy for higher beta, wider spread financials, I believe it will trade that way. Perception will become reality.”
He’s right. The moment a liquid hedging instrument exists, it becomes a mechanism through which negative sentiment expresses itself in real time. Every bad headline, every redemption announcement, every NAV markdown has a place to land in CDX spreads. Those spreads feed back into coverage, into investor sentiment, into redemption decisions.
The industry just got a new way to be shorted. It will be used.
The Maturity Wall Nobody Wants to Talk About
The redemption story has dominated coverage for months. It may not be the most important story.
More than $330 billion of high yield, leveraged loan and BDC-linked software and technology debt is coming due through 2028. The single biggest year is 2028, with roughly $130 billion maturing. Citigroup’s Michael Anderson and Steph Choe flagged the specific problem: a third of these loans still have 2021 credit dates, meaning the borrowers haven’t demonstrated capital market access in years. The average price of the 2021 vintage, 2028 maturity cohort is $83.40.
That’s not stress. That’s distress pricing on a large pool of debt that hasn’t technically defaulted yet.
Refinancing efforts are already running into trouble. Some private credit funds are turning away software borrowers outright. Several PE-sponsored software exits have stalled. The leveraged loan market’s technology premium has completely collapsed this year.
Marathon Asset Management Chairman Bruce Richards said this week that as much as 15% of software direct lending could default in the coming years. Goldman Sachs Asset Management’s Vivek Bantwal pushed back, noting that most private credit software exposure sits at the top of the capital structure and is relatively insulated from restructurings.
Both can be true simultaneously. Senior secured lenders may recover well on individual credits while broader portfolio marks deteriorate, distributions get pressured, and redemption demand stays elevated. The headline default rate and the NAV trajectory are different numbers that tell different stories.
Lincoln International’s bad PIK data is the most honest leading indicator available. About 6.4% of direct lending borrowers had bad PIK in Q4, up from 2.5% at end-2021. Bad PIK is PIK added during the life of a loan to relieve cash flow pressure, not PIK that was part of the original structure. It’s the lender and borrower jointly agreeing that the company can’t service its debt in cash. Loan-to-value ratios on these borrowers are soaring.
That’s the pipeline for the default cycle. It doesn’t show up in non-accrual rates until it does, and by then it’s already in the marks.
Ares Gets Smaller on Purpose
Ares is planning its next flagship US direct lending fund at approximately $20 billion, significantly below the $33.6 billion record it raised for the prior vehicle.
This is being framed as adapting to market conditions. It’s more interesting than that.
The previous fund used substantial leverage and raised equity commitments of $15.3 billion against a $10 billion target. The new vehicle, Ares Senior Direct Lending Fund IV, targets $10 to $12 billion in equity with significantly less leverage. Total AUM roughly halves. The fee base shrinks.
Ares is choosing to raise less money at lower leverage in a market where they could probably still raise more. That’s a deliberate signal about where they think deployment opportunities are and what risk they want to carry into a deteriorating credit environment. A smaller, less levered fund deploys faster into a wider-spread market and carries less refinancing risk on the liability side.
It’s also a signal about where institutional LP appetite is going. Ares raised $9.8 billion for opportunistic credit and $7.1 billion for credit secondaries earlier this year. That capital is chasing dislocation. The flagship direct lending fund is being right-sized for a more disciplined origination environment. The money is being allocated where the opportunity is, not where the brand historically sat.
Howard Marks Does What Howard Marks Does
Oaktree co-founder Howard Marks sent a note to clients this week clarifying the firm’s software and direct lending exposure.
Software credit exposure: “extremely small on an absolute basis and relative to peers.” Direct lending: less than half of Oaktree’s private credit book, about 20% of performing credit investments and less than 15% of total AUM. Public direct lending vehicles: just over $10 billion, against $40 to $50 billion for the leading managers.
The note was careful, precise and landed exactly when it needed to. Marks has spent decades building the credibility that makes a client letter like this move markets. The timing, as the industry faces its most intense scrutiny in years, is not accidental.
The substantive point is worth taking seriously independent of the positioning. Oaktree built its franchise on distressed debt and mezzanine, not direct lending. It has been in private credit for decades and deliberately avoided the retail-facing BDC structures that are currently under the most pressure. When the firm says it maintained “a particularly high bar” for new software transactions over the last 12 to 18 months, that’s consistent with the investment culture Marks has built over 30 years.
It’s also a clean contrast with the managers who rode software exposure to record AUM and are now managing the consequences.
Europe Is Positioning and It’s Working
European private credit managers are having the best quarter in years, and they’re not being subtle about why.
Hayfin, Pemberton and AlbaCore have been telling potential investors explicitly that the problems in private credit are predominantly a US story. Software exposure at Pemberton: less than 1%. At Hayfin: less than 5%. AlbaCore’s entire senior lending strategy has a single software borrower.
Pemberton’s Mark Hickey said it plainly: “The current challenges in private credit are predominantly a US story. This is driven by the scale of retail capital invested and high exposure to the software sector. The picture in Europe is very different.”
The data supports the pitch. Europe-focused private credit funds captured 46% of global fundraising in the first three quarters of 2025, up sharply from 23% in 2024. That’s not a marginal shift. That’s a reallocation.
The most telling detail came from Hayfin’s Marc Chowrimootoo. The firm expects to win an upcoming deal over a US rival despite offering less favorable pricing. The borrower, anticipating the need for follow-on financing, is wary of the US lender’s retail capital exposure and balance sheet leverage.
When sponsors are reportedly choosing European lenders at wider spreads because they’re uncertain about the stability of a US lender’s capital base, the US market has a problem that goes beyond quarterly NAVs. The relationship between private credit managers and the sponsors who bring them deals is the foundation of the origination business. If that relationship is starting to shift, AUM numbers follow with a lag.
The Quiet Winners
The firms playing offense right now are worth watching closely.
Blackstone hit its $10 billion hard cap for its opportunistic credit fund. Ares raised nearly as much for a similar vehicle. Even Blue Owl, the firm at the center of the retail stress, raised $2.9 billion for a new opportunistic credit fund, citing “an increasingly attractive opportunity set, driven by market dislocation, complexity and the demand for flexible capital.”
Goldman’s Private Credit Fund saw redemption requests of just 4.999% in Q1, a sliver under the 5% limit. The firm’s letter to shareholders was almost clinical in its confidence: when capital becomes scarce, spreads widen, structures tighten, documentation improves. Goldman is describing a market that is getting better for disciplined lenders with dry powder.
Morgan Stanley is launching a new interval fund investing predominantly in private credit. Into this market. That’s either a contrarian confidence signal or a belief that the structural problems are product-specific rather than asset-class-wide.
Deutsche Bank’s distressed desk more than doubled quarterly profit partly by shorting software company debt. UBS packaged $500 million of stakes in eight private credit funds into insurance-backed debt, allowing it to exit positions without direct sales. The secondary market for private credit positions is developing in real time, under pressure.
The Wall Street playbook in a distressed cycle is consistent across decades. Firms with capital and flexibility buy from firms without. The CDX index just made it easier to express a view on which category specific BDCs fall into.
Carlyle Joins the Queue
The pattern is familiar but one detail in Carlyle’s situation is worth noting.
Carlyle’s Tactical Private Credit Fund, a $7 billion vehicle, capped redemptions at 5% after investors asked to pull 15.7% in Q1. Investors who requested approximately $750 million received about $240 million. The fund’s software exposure is around 12%.
Carlyle noted that its redemption deadline was later than most peers, which likely left it exposed to elevated requests from investors whose capital was already gated at other funds. The implication, though Carlyle didn’t state it directly, is that some of the pressure reflects queue dynamics across the industry as much as specific concerns about the fund itself.
Moody’s revised its outlook on non-traded BDCs to negative this week. The reasoning was circular but accurate: proration and elevated redemption headlines incentivize other investors to seek redemptions. The feedback loop that market observers have been warning about for months now has a Moody’s rating action attached to it.
Where the Cycle Stands
Three things are true simultaneously and they point in different directions.
The firms with dry powder are genuinely finding opportunity. Blackstone, Ares, Goldman and others raised tens of billions for vehicles explicitly designed to buy into this dislocation. Spreads are wider. Structures are tightening. Documentation is improving. For patient capital with no redemption pressure, the vintage of loans being originated right now may look very good in five years.
At the same time, the problems in the retail-facing BDC structures are not resolved. The motivated seller universe hasn’t cleared. Redemption queues at some funds extend two years at current cap rates. The CDX index now gives short sellers a clean instrument. Moody’s just turned negative on the sector. The maturity wall is a 2027 and 2028 story, not a 2026 story, meaning the default cycle that bad PIK data is signaling hasn’t arrived yet.
And then there’s the software question, which sits underneath all of it. More than $130 billion of technology debt matures in 2028 alone. A third of those loans haven’t been in the market since 2021. The borrowers that can refinance will. The ones that can’t will find out who their lender really is.
That’s the test that hasn’t happened yet. Everything playing out right now, the redemptions, the CDX launch, the European repositioning, the opportunistic fundraising, is the market getting into position before it does.
