Private Debt News Weekly Issue #50: Beneath the Boom, Restructurings Rise and Retail Moves In
Defaults creep higher, retirement capital floods in, and the smartest credit capital rotates toward structure, liquidity, and control.
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This week, the private credit machine keeps running, but warning lights are flashing louder. While fundraising remains strong and allocations are growing—especially through 401(k) platforms—beneath the surface, cracks are emerging. Defaults are rising, valuation pressure is building, and restructuring advisers are busier than ever.
Meanwhile, global banks like HSBC and Standard Chartered are reorganizing to chase the boom, while Apollo, Carlyle, and Franklin push deeper into retail and asset-backed credit. But the question isn’t “is private credit growing?” It’s whether the market really understands what it owns—and how fast it can get out when it needs to.
Key Market Trends
1. Restructuring Advisers: “Almost Every Complex Situation Involves Private Credit”
According to top restructuring teams at EY, Macfarlanes, and FTI Consulting, private credit is now involved in 80%+ of all complex workout cases.
Default rates in Fitch’s private credit portfolio hit 8.1% in 2024, up from 3.6% in 2023.
More debt-for-equity swaps are happening behind closed doors, and lenders are stepping in to “take the keys.”
Most of these deals are 2021–2022 vintages with stretched documentation and PIK toggles.
Why it matters:
LPs aren’t hearing about this yet. Many managers are delaying marks, restructuring quietly, and deferring cash payments. But the stress is here—and rising.
2. Private Credit Is Eating Retirement Portfolios
Empower, one of the largest U.S. retirement plan administrators, is working with Apollo, Franklin, Goldman, Pimco, Neuberger, and Partners Group to roll out private credit and private equity options in 401(k)s across the U.S.
The allocation target: 10–15% in private markets within 10–15 years.
T. Rowe Price and Blackstone are making similar moves with blended funds.
Apollo and State Street already launched a target-date fund with a 10% private credit sleeve.
Why it matters:
Retail is now the growth channel. But it also introduces new liquidity and valuation risks, especially in plans with daily mark-to-market transparency obligations.
3. Managers are Still Raising Billions—But It’s Not Just Direct Lending Anymore
Hillhouse’s Elham Credit Partners is nearing a $750 million first close for its debut Asia-focused private credit fund.
Redaptive raised a $650 million asset-backed facility led by Nuveen and CDPQ.
Axsome Therapeutics secured a $570 million loan from Blackstone Credit & Life Sciences.
Shapoorji Pallonji is negotiating a $3.4 billion facility, the largest private credit deal in Indian history.
Trend:
The smartest capital is migrating toward real assets, healthcare, and structured finance, not vanilla LBO loans.
4. Private Credit vs. Ratings Agencies: UBS Says There’s Trouble Coming
UBS warns that the rise of unrated private loans is cutting into the business model of S&P and Moody’s.
In 2024, leveraged loan ratings made up 7% of Moody’s and 4% of S&P’s revenue.
Fewer rated loans = less revenue.
Over 160 unrated private credit transactions occurred in 2024, up from fewer than 10 in 2019.
S&P and Moody’s are trying to adapt, rating private credit portfolios and structured deals. But the rating lag and lack of data transparency will remain a challenge for years.
5. Private Credit’s “Golden” Moment Is a Bit Tarnished
While Apollo and Ares posted record fundraising in Q1, others are more cautious.
Many managers are sitting on aging portfolios with high leverage and weak covenants.
Over 40% of private credit borrowers had negative free operating cash flow even before Trump’s tariff surge, per the IMF.
Valuations are flat, but BDCs and CLO spreads are moving—suggesting markdowns are coming.
Behind the optimism, more managers are starting to prepare for pain. As Oaktree’s Robert O’Leary put it, “We see more chances to buy marked-down assets in the next 12 months.”
Industry Fragmentation: Size, Scale, and Strategy Drift
At the LSTA DealCatalyst conference, private credit managers clashed over whether scale is strength or a liability.
Large firms like Blackstone and Apollo dominate allocations, but returns are being diluted by volume.
Middle-market managers argue they have better sourcing, terms, and actual edge—but can’t compete on access or retail partnerships.
Katie Koch of TCW predicts “massive dispersion” in manager performance over the next 24 months.
Why it matters:
Private credit is no longer one trade. It’s a fragmented, strategy-specific marketplace. Investors now need to choose between scale, structure, and specialization.
Deals to Watch
Carlyle lent €280M to French gym operator Fitness Park.
Arcmont and Goldman backing Astorg’s Solabia stake purchase (~€650M).
KKR is in talks to lend €300M+ to Dedalus SpA, a healthcare IT platform.
Benefit Street is exploring a $2B secondaries transaction to return liquidity to LPs.
Forward Outlook
Quiet Restructurings Will Accelerate
Behind the valuation lag, defaults and debt-for-equity swaps are mounting.
Retail Access Will Force New Reporting Standards
Expect Morningstar ratings, liquidity gating frameworks, and ERISA scrutiny.
Structured Credit and Asset-Backed Lending Will Dominate Fundraising
Big LBO deals are out. Healthcare, infra, and recurring cash flow structures are in.
Secondaries and NAV-Based Financing Will Explode in Q3–Q4
LPs want liquidity. GP-led deals are the pressure valve.
Private Credit is Still Growing—But Maturing Fast
This isn’t 2021. Fund managers, allocators, and borrowers all need to evolve—or step aside.
Final Takeaway
Private credit’s fanbase keeps growing—but so does its complexity, its concentration, and its fragility. There are still plenty of deals, and plenty of capital. But the next phase will be defined by who can manage the slow bleed beneath the surface—without triggering a rush for the exit.
Stay tuned with Private Debt News Weekly—your edge on the signals, shifts, and shakeouts shaping the world’s most misunderstood asset class.