Private Credit News Weekly Issue #100: Apollo Lands $35 Billion to Buy Anthropic's Chips as Redemptions Hit New Records
Broadcom backstops the biggest private credit deal in history while BCRED, Cliffwater, and Monroe all cap withdrawals and the default rate hits 6%
Apollo and Blackstone just closed $35 billion to buy AI chips for Anthropic. The same week, three of the biggest retail credit funds in America slammed their gates shut.
The Anthropic deal ranks among the largest private credit transactions ever. A special-purpose vehicle buys Google’s custom TPU chips, leases them to Anthropic, and the lease payments back the debt. Broadcom backstops the senior tranches. The $6 billion A1 notes priced at 100 bps over Treasuries, the $24 billion A2 notes at 5.75%, and a $4.5 billion unbacked tranche at 8.5%. Apollo’s Athene insurance arm bought into the A2s. The deal landed days after Anthropic’s confidential IPO filing and a $65 billion raise valuing the firm at $965 billion.
On the retail side, Blackstone capped BCRED at 5% after investors sought 10%, a record. Last quarter executives wrote personal checks to meet 7.9% in full. This time they let the cap hold. Cliffwater gated its $31 billion flagship after requests hit 17%, returning about a third. Monroe capped for the first time after investors sought 9%.
The default rate hit 6% at the end of April, a record since Fitch started tracking. At the Bloomberg Global Credit Forum, the mood turned grim. Glendon’s Holly Kim invoked “the laws of physics.” Davidson Kempner’s Suzanne Gibbons said EBITDA addbacks have doubled, meaning loans that look like 45% LTV are closer to 65%.
SDNY’s Jay Clayton said his office is examining managers who mark a loan at 95 while everyone else has it at 75. Apollo’s Jim Zelter warned of two more quarters of turbulence, with the industry learning “who are our longer-term friends and who are the shorter-term tourists.”
Key Market Themes
1. Apollo and Blackstone Close $35 Billion Chip Deal for Anthropic
Apollo and Blackstone finalized $35 billion to fund Google’s custom chips for Anthropic to lease, one of the biggest private credit deals ever. An SPV raises debt and equity to buy the chips, then leases them out, with lease payments backing the debt. Broadcom backstops the senior portions. About half the debt got syndicated.
The $6 billion A1 notes sold to banks at 100 bps over Treasuries. The $24 billion A2 notes priced at 5.75%, bought partly by Apollo’s Athene insurance arm. The $4.5 billion B notes, with no Broadcom backing, sold at 8.5%. Apollo’s Atlas SP put in $800 million of equity, making it the SPV’s owner.
The key feature is Broadcom’s “residual value support.” If Anthropic stops paying, the SPV sells the chips. If that doesn’t repay senior investors, Broadcom covers the shortfall on the A1 and A2 notes. Meta used the same structure for its Hyperion data center. Broadcom CEO Hock Tan said the firm is building an AI platform with Apollo and Blackstone to deploy more than 20 gigawatts of compute through 2028.
The takeaway
Strip out the Broadcom guarantee and this deal falls apart. That’s the whole story in the spread between the 5.75% backed notes and the 8.5% unbacked ones. The market is pricing Broadcom’s credit on the senior tranches and a bet on Anthropic’s survival on the junior. Athene buying the A2s shows who absorbs the risk: insurance balance sheets that want long-duration paper and trust the backstop. Nobody can say what those chips are worth in 2029. Broadcom is betting they hold value. The 8.5% buyers are betting on Anthropic, not the hardware.
2. BCRED, Cliffwater, Monroe All Cap Redemptions
Blackstone capped its $79 billion BCRED at 5% after investors sought 10%, a record for the fund. Last quarter the firm tapped executives for personal capital to meet 7.9% in full. With requests even higher this time, Blackstone let the cap hold.
Cliffwater limited its $31 billion flagship at 5% after investors requested 17%, returning about a third. The prior quarter it returned half of 14% while capping at 7%. S&P then cut its outlook to negative, warning the 5% threshold is “an important guardrail.” Monroe gated for the first time after investors sought 9%, returning 56%. CEO Ted Koenig: “When individual investors want to get out, they’re like fish, they swim in schools.”
BCRED is marked at 96.1 cents on the dollar, with the worst 5% of the portfolio at 68.3 cents.
The takeaway
Blackstone tapping executives for $150 million worked once. It doesn’t work every quarter, so they joined everyone else. The progression is what alarms: Cliffwater investors asked for 14%, then 17%. Each gating leaves the rest queued for next quarter, mechanically inflating the next round. The number that actually matters is BCRED’s worst 5% at 68.3 cents. That’s where the software stress lives. As long as the rest holds near par, the blended 96.1 looks fine. Push more names toward that 68-cent tail and the math turns ugly.
3. Default Rate Hits Record 6% as Credit Forum Turns Dark
The private credit default rate reached 6% at the end of April, a record since Fitch started its gauge. Industrial, manufacturing, and business services drove most of it. Many restructurings still aren’t captured in public reporting.
At the Bloomberg Global Credit Forum, Glendon’s Holly Kim said losses given default are simply going higher. “I just believe in the laws of physics. The higher the rate you charge, the higher your default should be.” For the first time in her career, she said, there’s a pipeline of defaults building. Davidson Kempner’s Suzanne Gibbons pointed to the gap between reported and adjusted earnings: addbacks have roughly doubled over the last decade, so loans that look like 45% LTV are closer to 65%. PIMCO’s Daniel Ivascyn said the first sustained default cycle in years has already started.
Investors are also done with liability management exercises. Sculptor’s Brett Klein said the LME experience “has been bad,” and investors now say “no más” and ask sponsors to just file for bankruptcy.
The takeaway
The 6% rate understates the problem because debt-for-equity swaps don’t always count, and Gibbons’ addback point means recoveries will disappoint when defaults hit. Kim’s pipeline is the part to sit with. This is forming in a growing economy, with no recession to blame. The trigger is the calendar, as 2020-2021 loans built for zero rates hit maturity at 5%-plus. Investors refusing LMEs removes the release valve that let sponsors push problems forward for a decade.
4. SDNY Probes Valuation Discrepancies
Jay Clayton, the US attorney for the Southern District of New York, said his office is examining the same loan marked at wildly different prices across managers. “When you have a market where a large portion of them have it marked at say 75 and one or two have it marked at 95, that’s a place where you say, okay, I need to ask some questions about the folks who are marking it at 95, particularly if they’re making fees off it.”
Clayton said divergent marks sat at the heart of First Brands, Tricolor, and 777 Partners. He also warned against “pearl-clutching,” calling private credit a boon to the economy. The DOJ’s Manhattan office has sought information about BlackRock TCP Capital Corp. Clayton previously chaired the SEC and sat on Apollo’s board. Apollo now prices some $830 billion of credit assets daily.
The takeaway
Clayton just turned valuation from an accounting debate into a prosecutorial one. The pattern he’s chasing is precise: one loan, most holders at 75, the fee-collecting outlier at 95. Keeping restructurings out of public reporting suddenly looks like evidence rather than convention. Apollo’s daily pricing reads differently here. A daily mark creates a trail that makes 75-versus-95 divergence hard to sustain. Firms still relying on quarterly internal estimates carry the exposure.
5. Institutional Fundraising Holds as Retail Cracks
While retail funds gated, institutional capital kept flowing. Eurazeo raised €3.9 billion for its flagship direct lending fund. Bridgepoint is set to raise about €5 billion. Crescent Capital closed its largest fund ever at more than $5.5 billion.
Ares co-president Blair Jacobson pushed back hard. The firm’s roughly 3,000 portfolio companies are growing 8% to 12% a year with non-accruals lower than historically. “There’s a lot of discussion and anxiety about distress. We aren’t seeing it.” Non-traded BDCs facing retail flight are dwarfed by closed-end institutional vehicles with no redemption mechanism. The bond market reopened too: FS KKR sold $900 million of junk bonds at 7.5% after targeting $400 million, drawing $1.5 billion in demand.
The takeaway
The cleanest signal in the market is the split. Pensions and insurers commit for years and can’t redeem, so they keep deploying. Retail can ask quarterly, and it’s asking. Jacobson’s argument holds and has a catch: Ares marked three Clearlake software credits into the low-to-mid 70s last quarter. Aggregate health and individual blowups coexist. The aggregate funds the optimism. The blowups feed the redemptions. FS KKR raising $900 million while carrying two dividend cuts and junk downgrades shows the bond market will fund nearly anyone at a price.
6. Distressed Buyers Circle as “Anxious Capital” Exits
The redemption pressure forcing gates is creating openings for distressed buyers. GoldenTree’s Steven Tananbaum said “anxious capital” has left direct lending. “We certainly are seeing better value in private credit today than we have seen in the last 24 to 36 months.” He flagged debt-equity mismatches in software and cable, naming Comcast, Charter, and Cable One.
Diameter’s Scott Goodwin called it “way too early” to buy distressed software debt now, since the AI boom just started. But as BDCs come under pressure, “they’re going to sell their highest-quality software loans at some discount to par. We’ll be interested in those.” TPG Credit, Oaktree, and Oak Hill led around €1 billion at 11% for Bally’s Intralot’s acquisition of gambling firm Evoke.
The takeaway
Goodwin’s logic is the part worth following. Forced sellers won’t dump their worst loans first. They’ll sell their best software paper, the stuff that still trades near par, because it clears fast and raises cash. The distressed names stay stuck because nobody wants them at a fair price. So the opportunity is in quality loans sold cheap by funds that need liquidity, not in the genuinely troubled credits. The Evoke deal at 11% shows where stressed borrowers land now: double-digit coupons, mandatory prepayments, ranking behind existing bonds.
7. Zelter Warns of Two More Quarters of Turbulence
Apollo President Jim Zelter said redemptions will likely continue for two more quarters, with a possible uptick from investors trying to “game the system.” Funds that gate at 5% leave unfulfilled requests rolling forward, giving investors incentive to over-request. “We’re not through the turbulence yet.”
Zelter said BDCs face scrutiny over perceived concerns rather than actual performance. “We’re learning who are our longer-term friends and who are the shorter-term tourists.” On defaults, he was measured: if the 30-year average is 3% to 3.5%, the five-year trend running higher is “probably in the cards,” but he sees no evidence of dramatically higher rates yet.
The takeaway
Zelter naming the gaming dynamic explains why headline redemption numbers may overstate real exits. If you want 5% out and know you’ll get a third, you ask for 15%. The 17% at Cliffwater and 10% at BCRED partly reflect that distortion. It cuts both ways. Sentiment may be less catastrophic than the numbers suggest. But the pressure is self-reinforcing and won’t resolve until investors trust they can leave, which requires funds to stop gating, which they can’t do while requests stay elevated. That loop doesn’t break on Zelter’s two-quarter schedule. It breaks when the maturity wall sorts the real underwriters from the lucky ones.
Deals of Note
Anthropic - Apollo and Blackstone closed $35B across three tranches for Google TPU chips, Broadcom backstopping the $6B A1 (100 bps over Treasuries) and $24B A2 (5.75%) notes; $4.5B B notes at 8.5%; Apollo’s Atlas SP provided $800M equity
Evoke - TPG Credit, Oaktree, Oak Hill, Man Group, and others provided around €1B at 11% for Bally’s Intralot acquisition, refinancing €945M of 2028 debt
The Star Entertainment Group - WhiteHawk Capital closed $390M senior secured financing for the Australian casino group
Perk - $300M facility led by Neuberger Specialty Finance, alongside Blue Owl, Hercules, and Liquidity
Liberty Puerto Rico - Silver Point co-led $200M secured term loan for telecom subsidiaries
FS KKR - $900M junk bond at 7.5% after $400M target, drew $1.5B in demand
Eurazeo - Raised €3.9B for latest flagship direct lending fund
Crescent Capital - Closed largest fund ever at more than $5.5B
The Reality Check
Apollo lands $35 billion for Anthropic’s chips the same week three major retail funds gate. Both are the same story. Insurance balance sheets and Broadcom guarantees flow into the AI buildout while retail money tries to flee the software loans that funded the last cycle. Smart capital is financing what comes next and selling what came before.
A 6% default rate sounds manageable until you add Gibbons’ point about addbacks. If real leverage runs two turns higher than disclosed, recoveries land well below what the models assume. Kim’s pipeline of defaults is forming without a recession to trigger it. The 2020-2021 vintages just can’t carry their debt at current rates, and investors have stopped granting extensions to delay it.
Clayton hunting valuation discrepancies changes the calculus for every manager marking optimistically. One loan at 75 across most holders and 95 at the fee-collecting outlier is now a target, not a footnote.
Zelter’s two-quarter timeline may prove optimistic. Capped redemptions teach investors to over-request, which inflates the numbers, which justifies more capping, which keeps everyone trapped. The loop breaks when the software maturity wall reveals which managers underwrote real businesses and which mistook a decade of cheap money for skill.