Private Debt News Weekly Issue #51: Too Much Capital, Not Enough Conviction
Spreads tighten, mega-deals return, and secondary markets stir as private credit runs into its own success.
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This week, private credit sits at a paradox: record capital, fewer deals, tighter spreads, and rising doubts. From a $5.5 billion mega-deal to a $250 million distressed loan auction, the market is growing rapidly—just not necessarily safely.
Fund managers are flush with capital, but many are warning there are too few attractive opportunities, and competition is crushing yields. As a result, direct lenders are drifting further into complexity—data centers, infrastructure, crypto-backed loans, and now even municipal-style projects. Meanwhile, regulators and rating agencies are finally starting to ask the uncomfortable questions.
Here’s your breakdown of the week’s themes, tensions, and realignment in the $1.7 trillion private credit universe.
Key Themes
1. Too Much Capital, Too Few Good Deals
Top credit managers are openly admitting what most LPs are only beginning to suspect: there’s a glut of capital and a drought of high-conviction lending opportunities .
Apollo CFO Martin Kelly: “We accessed cheap spread liabilities, but didn’t think it was appropriate to invest in tight spread assets at the same time.”
Sixth Street’s Josh Easterly: “The sector is not earning its cost of equity. Everyone’s holding out for better pricing.”
PitchBook’s Marina Lukatsky: Lenders are fighting for scraps, and it’s crushing spreads.
What it means: The market is oversaturated. Unless M&A activity returns meaningfully, expect further spread compression and more crowding into structured and esoteric credits.
2. Ares Leads $5.5 Billion Private Credit Deal—But at a Cost
Clearlake’s acquisition of Dun & Bradstreet closed with a $5.5 billion private debt package—one of the largest on record .
Terms: SOFR + 550 bps, issued at 99 cents on the dollar.
Investors: Ares led the deal, joined by Blue Owl, Golub, Morgan Stanley, and more than 20 others.
This replaces a $5.75 billion bridge loan led by banks.
Why it matters: Even in the largest deals, private lenders are syndicating to traditional loan buyers, and banks are still in the room. The lines between public and private debt are now entirely blurred.
3. The Quiet Rise of Infrastructure Credit
Private lenders are now targeting what’s long been bank and muni territory: roads, power grids, water systems, and schools .
Why now? Federal support is drying up, inflation is raising project costs, and municipalities are hitting budget walls.
Ares, Apollo, and Brookfield are positioning themselves to replace banks and public funding sources in the next infrastructure cycle.
The pitch: long-dated cash flows, low default risk, and political alignment.
Takeaway: Infrastructure may be the next structured-credit gold rush, but complexity, liquidity, and public backlash risks remain.
4. Venture Debt and Tech Credit Are Falling Behind
While direct lending soars, venture debt fundraising dropped 63% in 2024 to $1.3 billion .
Why? Riskier borrowers, weaker credit stories, and more write-downs.
Many tech borrowers raised at frothy 2021 valuations, and lenders don’t want exposure to the fallout.
Meanwhile, larger BDCs are focusing on repeat sponsors and “hard asset” borrowers.
Translation: Venture credit is under pressure, and only the most disciplined tech lenders will survive the reset.
5. Private Credit Ratings Face Credibility Test
Fitch, KBRA, Morningstar, and others are now fighting for dominance in private debt ratings—but trust is fragile .
Fitch accused KBRA of inflating ratings based on retracted NAIC data.
Morningstar is pushing into the space, and its CEO says 25% of its credit ratings revenue now comes from private deals.
Regulators are watching closely, especially as ratings are used to determine insurance reserve requirements.
Issue: Most deals are still rated by the firm chosen (and paid) by the issuer, creating clear conflicts of interest. As the market grows, that practice looks increasingly risky.
6. Secondary Market Opens Up—Stifel Runs BWIC Auction
Stifel is auctioning $250 million of direct loans in a BWIC (bids-wanted-in-competition) process—rare in private credit .
Roughly half the loans are distressed or stressed, and none are sponsor-backed.
Buyers must bid loan by loan, not as a block.
What this signals: Private credit is finally building a tradable secondary market—but it’s still thin, illiquid, and relationship-driven.
7. The Retail Flood Accelerates—Especially in Asia & the Middle East
From Singapore to Saudi Arabia, private credit is now a retail product .
Diameter Capital launched a U.S. interval fund targeting HNW retail buyers.
Asia-Pacific AUM hit $95 billion, and some estimates see $78B in new retail demand in Singapore alone.
Middle East private banks and sovereigns are demanding Sharia-compliant, yield-focused credit solutions.
Big picture: Distribution is the battleground. Firms with better education, structures, and partnerships will win the wallet share.
Deals of Note
Clearlake Capital: $5.5B for Dun & Bradstreet (Ares-led)
Consumer Cellular: $3B+ from HPS to refinance syndicated loans
PowerGrid Services: Apollo buying from Sterling, backed by $1B in private debt
Shapoorji Pallonji (India): $3.4B private loan, biggest on record in the country
Parkview Group (HK): PAG provided HK$300M private loan for distressed real estate firm
Forward Outlook
Spreads Will Stay Compressed Until M&A Truly Recovers
Funds have capital. But they’ll need to wait for sellers—and pricing—to adjust.
Private Credit’s Rating Problem Is Headed for Regulatory Attention
Expect NAIC and global regulators to demand multiple ratings or stricter frameworks by 2026.
Asia and the Middle East Will Be the Next Frontier—For Capital and Deployment
From Abu Dhabi to Singapore, local capital wants yield and local deployment. The next LP battleground has arrived.
Secondary Markets Are Coming—But Liquidity Will Stay Elusive
BWIC auctions are a start. NAV-based trading desks will follow. But true liquidity is still 12–24 months away.
Managers Will Go Deeper into Complexity to Protect Margins
From AI data centers to infrastructure loans to crypto-secured pools, the next yield won’t come from plain vanilla term loans.
Final Takeaway
Private credit is still surging. But the market’s easy-money phase is over.
Spreads are tight. Capital is overcommitted. And everyone is fighting for the same shrinking pool of real, risk-adjusted yield. The next phase will reward structure, patience, and edge—not just scale.
Stay sharp. And stay tuned with Private Debt News Weekly—your lens on the signals, stress, and strategies behind the credit cycle.
There’s a reason capital is pooling at the top of the private credit market: scale is efficient, syndication is smooth, and structured deals look good on pitch decks. But that doesn’t mean they offer compelling returns.
As spreads compress and complexity increases, many GPs are optimizing not for performance — but for defensibility. In this environment, nobody ever got fired for putting money to work in a widely syndicated, sponsor-backed deal. It’s clean, explainable, and safe — until it isn’t.
That incentive structure creates a crowding effect. Not necessarily into bad deals, but into familiar ones. And familiarity often comes at the cost of genuine risk-adjusted opportunity.
What’s being missed isn’t a secret goldmine — it’s a category of opportunities that fall between institutional lanes: too operationally involved for passive credit arms, too small or complex for scaled capital, and too bespoke for mass underwriting. These deals require work, not just capital.
In a regime where capital is overcommitted and returns are under pressure, the edge won’t come from engineering more structure — it’ll come from doing what’s harder to justify in a Monday meeting, but more likely to outperform over a full cycle.
Thanks for sharing this thorough overview! It really captures the current challenges in private credit—record capital but tight spreads and fewer quality deals pushing lenders into more complex and riskier areas. The growing role of infrastructure credit and the rise of secondary markets are especially interesting trends to watch. Looking forward to following how this evolving landscape plays out.