Private credit headlines have calmed down in recent months. It could be because these debt markets are doing just fine...or it could be because we’re too distracted by wars, exploding bond yields, and gas prices. But just because there haven’t been high-profile bankruptcies like last year’s First Brands or Tricolor doesn’t mean there isn’t trouble brewing in the opaque private credit markets. Consternation about these portfolios is growing: redemption requests are outpacing inflows, reports of massive payment-in-kind adjustments keep surfacing, and credit default swaps on private credit-backed loans are popping up. This crisis may not be as concentrated as the 2008 meltdown, but the numbers are bigger. And at the center of it all is a market we can’t see.

Resources

Federal Reserve: The Rise in Mortgage Defaults

Bloomberg: SoftBank’s OpenAI Debt Gets Costlier, Riskier and Even Bigger

The Japan Times: Apollo mulls raising SoftBank loan to $9 billion for OpenAI bets

IFR: Trading frenzy builds in hyperscaler debt and CDS markets

LSEG: Get ahead of the September index roll

Yahoo! Finance: Alphabet, Meta, and Microsoft Are Hiding $3 Trillion in Debt On the AI Boom’s Hidden Ledger

Yahoo! Finance: Blue Owl Capital (OWL) Ties Into Meta’s $50 Billion Hyperion Expansion

Reuters: Private credit bosses hit back at ‘misinformation’ over First Brands collapse

Reuters: Private credit roundup: Software marks and Blackstone’s backlog of redemptions

Bloomberg: Private Credit Defaults Are 1%, 6% or 19%, Depending Who You Ask

UNFTR Resources

Video: How AI Debt Could Blow Up Private Credit.

Essay: Private Credit: Just Because We’re Not Talking About It Doesn’t Mean It’s Not a Problem.

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