Private Debt News Weekly Issue #57: Debt Creep, Deal Bloat, and the Limits of Scale
Private credit keeps pushing forward—but signs of exhaustion are mounting beneath the headlines
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Welcome back to Private Debt News Weekly, where deal volume is healthy, capital is flowing, and the cracks are quietly deepening.
This week, direct lenders helped fund $510 million for VinFast, $650 million for Greenko, and a planned $3 billion refi for Flexera. Insurers continue piling into the asset class, with allocations now near a third of their total portfolios. And private credit just landed its first major direct lending platform in the Middle East, as Hilco sells a stake and launches a unit backed by Orix.
But not everything is on track. Distress is building. Venture debt is vanishing. JPMorgan is warning of froth. Sixth Street’s Waxman says the factory model is “eating the soul” of the industry. And the quiet capitulation continues—firms like Carlyle are now handing companies to creditors outright.
Let’s get into it.
Key Market Themes
1. Insurance Capital Keeps the Flywheel Spinning
Insurers now control nearly a third of U.S. private credit exposure—and 58% of them plan to increase their allocations again this year.
The logic is simple: private credit yields ~9%, while investment-grade bonds yield ~2.4%. But as competition rises and protections fall, some insiders are warning that the risk-adjusted spread isn’t what it used to be.
Why It Matters:
Insurance has become private credit’s most reliable funding base. But CIOs are growing more valuation-sensitive. If they start to reassess mark reliability or downgrade recovery expectations, allocation models could shift fast.
2. Credit Stress Is Building
More than a fifth of private companies have interest coverage ratios below 1.0. EBITDA for mid-size borrowers is down 23% since 2019. Leverage is up. And PIK usage is creeping higher across sponsor-backed loans.
2025 is on pace to surpass last year’s record for mid-market bankruptcies. Firms like Marblegate are already deploying rescue capital—while others are quietly triaging portfolios that were recap’d less than a year ago.
Takeaway:
The cracks aren’t coming. They’re here. If you’re not already marking down or renegotiating, you’re probably behind.
3. Carlyle Hands Over Keys to Dainese
In a potential first for the Italian market, Carlyle is preparing to turn over motorcycle brand Dainese to creditors HPS and Arcmont.
The move highlights a new, quieter phase of the cycle—where borrowers aren’t filing, but equity holders are walking away as sponsors prioritize optionality and future fundraising over balance sheet repair.
Signal to Watch:
Expect more “peaceful transitions” from private equity to private credit this fall—especially where paper is already marked sub-80.
4. The Return of the Mega Refi
Private lenders are lining up to refinance Flexera Software’s existing broadly syndicated loan with $3 billion in new private credit—plus a dividend kicker for sponsor Thoma Bravo.
The new debt will roll over 2021-era paper and include fresh capital, showing that for the right sponsor and sector, large-scale direct lending is still wide open.
But:
Not all lenders see value. Firms like Sixth Street and Brookfield are sitting out big club deals they view as over-bid and over-levered.
5. Venture Debt Hits a Wall
Venture debt fundraising fell 63% last year to just $1.3B globally, despite broader private credit growth.
Why? Higher rates, fewer equity rounds, and tighter scrutiny from LPs who now favor real assets, infra, and direct lending over early-stage exposure.
The Shift:
Venture debt isn’t dead—but it’s no longer an institutional story. Expect niche players and opportunistic capital, not billion-dollar funds.
6. Sixth Street Sounds the Alarm
Alan Waxman says the market is losing its edge. In a pointed rebuke of public peers, the Sixth Street CEO warned that private credit has become too crowded, too fast, too commoditized.
His fear: the factory model—raising money from insurers and retail, and deploying it regardless of price—is eroding the discipline that once made the asset class special.
Why It Matters:
Waxman’s warning echoes what JPMorgan Asset CEO George Gatch said last week: on the margin, he’d rather buy junk than private credit. The inflection point isn’t performance. It’s perception.
Deals of Note
VinFast raised $510M in a private credit loan from Deutsche Bank and SeaTown to fund EV expansion.
Greenko secured $650M to buy out Orix’s stake, deepening clean energy credit exposure.
Flexera is in market for a $3B refi plus dividend recap, led by direct lenders.
Hilco Global sold 70% to Orix and will launch a $1B direct lending platform.
FC Internazionale Milano placed €350M of private debt to retire public bondholders.
Forward Outlook
Bank refis are back—and will compete directly with large direct loan syndicates in H2.
More keys will change hands quietly—expect equity handovers, not courtroom fireworks.
Retail-driven credit structures will face deeper valuation pressure as flows soften.
Insurers may push for more transparency around credit marks as volatility returns.
Fundraising will slow, but the best managers will keep raising—just more selectively.
Final Takeaway
Private credit hasn’t hit a wall—but it’s walking a narrowing ridge.
The big deals keep coming. But beneath them, spreads are compressing, defaults are rising, and the industry’s best minds are starting to worry out loud.
The next phase won’t be about scale. It’ll be about survival, discipline, and knowing when not to lend.
Stay sharp.
Really high-quality. Thanks. What does where paper is already marked sub-80 mean?
Great stuff, thank you.