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WATCH: Marathon Asset Management founder and CEO Bruce Richards says private credit is too exposed to the software industry.Source: Bloomberg <\/p>\n(Bloomberg) — Even in the world of private credit, which for months has pitted skeptics against true believers after some high-profile blowups, the difference of opinion has reached new heights in the past week.<\/p>\n
To the likes of Jamie Dimon, Mohamed El-Erian and even a money manager from , the parallels with the run-up to the 2008 financial crisis are obvious. Financial firms are \u201cdoing dumb things\u201d in risky lending, JPMorgan Chase & Co.\u2019s chief executive officer said. El-Erian tagged Blue Owl Capital Inc.\u2019s decision to halt quarterly withdrawals from one of its retail funds a \u201ccanary in the coal mine\u201d for the $1.8 trillion private credit market. And Danny Moses, made famous in Michael Lewis\u2019 book, acknowledged the push for retail money \u201crhymes\u201d with what he saw some two decades ago.<\/p>\n
Most Read from Bloomberg<\/p>\n
In an interview with Bloomberg TV on Thursday, Marathon Asset Management LP Chairman Bruce Richards likened the problems in software to \u201ca train coming down the tracks that you could see from some distance.\u201d<\/p>\n
WATCH: Marathon Asset Management founder and CEO Bruce Richards says private credit is too exposed to the software industry.Source: Bloomberg <\/p>\n
\u201cIt wasn\u2019t a matter of if, it was just a matter of when. The markets have just woken up,\u201d he said. \u201cAnnual recurring revenue allowed companies to trade at way too high a multiple,\u201d he said, predicting refinancing challenges for heavily indebted firms.<\/p>\n
Then there\u2019s Bruce Flatt, CEO of powerhouse alternative asset manager Brookfield Corp.: \u201cThis is not that big of a deal,\u201d he said on Wednesday. \u201cIt is definitely not an \u201908, it has got nothing to do with \u201908.\u201d<\/p>\n
Executives at two of Europe\u2019s biggest insurers nodded to the widespread worries but were quick to reassure investors about their own risks.<\/p>\n
Jamie Dimon, Boaz Weinstein, and Mohamed El-Erian.Photographers: Al Drago, Jason Alden, Scott McIntyre\/Bloomberg <\/p>\n
Axa SA Chief Executive Officer Thomas Buberl said Thursday on Bloomberg TV that his group\u2019s exposure to private credit was \u201cfar below\u201d that of rivals, while Allianz SE Chief Financial Officer Claire-Marie Coste-Lepoutre said her company was \u201cvery comfortable\u201d with its position in a separate interview.<\/p>\n
Bank analysts are also jumping into the fray. Bank of America Corp. called Blue Owl a buy, blasting \u201cmisinformation\u201d around the money manager. Those at UBS Group AG, though, now see an even bleaker worst-case scenario for private credit: a default rate as high as 15% due to \u201crapid, severe AI disruption.\u201d<\/p>\n
As the war of words rages on, the market damage is undeniable. Just this year, shares of Ares Management Corp. have plunged 26%, Blue Owl is down 24%, Blackstone Inc. has dropped 23% and Apollo Global Management Inc. has slumped 19%, as shareholders take flight from asset managers that have plowed into private credit.<\/p>\n
Story Continues <\/p>\n
Perhaps no one embodies this moment in private credit more than Boaz Weinstein, the famous activist investor behind Saba Capital Management. He cautioned this week that he sees \u201cthe wheels coming off the car\u201d in the industry. Yet he\u2019s also offering to buy stakes in three funds managed by Blue Owl at steep discounts to their stated value, potentially standing to gain from any fears.<\/p>\n
Private credit grew rapidly in the wake of the 2008 financial crisis, filling the lending gaps created by regulations that hamstrung Wall Street banks. Many of the buyout shops that waded into the market have become sprawling asset managers in their own right, and are pushing for more money from individual investors after winning over institutions.<\/p>\n
Whether the naysayers or defenders prove to be right, it\u2019s increasingly clear that private credit is facing its first major test of confidence over whether it can withstand sustained pressure from concerns that one of its favored sectors, software, will be upended by artificial intelligence.<\/p>\n
<\/p>\n
\u201cGiven the scale of growth, I think private credit is now big enough that it deserves this attention, that it deserves this focus and it is healthy,\u201d said Hamza Lemssouguer, founder of Arini Capital Management. \u201cEvery single industry goes through this cycle and I think now it\u2019s the turn for private credit.\u201d<\/p>\n
Emotions Flare<\/p>\n
As the shares of major private lenders continue to slump, industry leaders aren\u2019t hiding their emotions.<\/p>\n
\u201cIt\u2019s frankly a frustrating narrative to folks like us that have been doing it a long time,\u201d Ares CEO Michael Arougheti said. \u201cWe\u2019re not seeing bad underwriting,\u201d but rather \u201cit\u2019s stable, rational, and performance for the top 10 players continues to be quite good.\u201d<\/p>\n
Blackstone posted a video to its social media channels in which Mike Zawadzki, its global chief credit investment officer, discussed the firm\u2019s view of software investing.<\/p>\n
\u201cWhen I look at our portfolio, what I see is that software companies are growing faster, are larger and better capitalized and have more equity cushion beneath them,\u201d he said. <\/p>\n
Blue Owl, too, took to social media with a white paper authored by its co-head of technology investing Erik Bissonnette touting its expertise in the sector, while claiming some software firms may benefit from AI rather than be replaced by it.<\/p>\n
The mood in earnings calls of business development companies this week was largely mixed.<\/p>\n
FS KKR Capital Corp. cut its dividend to 48 cents a share from 70 cents and said about 3.4% of its portfolio was on non-accrual at year-end, up from 2.9% in the preceding quarter, meaning it no longer expects to collect interest on those investments. It slashed the value on its loan to software company Medallia, as did the Blackstone Secured Lending Fund.<\/p>\n
New Mountain Finance Corp. disclosed that it agreed to sell $477 million of assets at 94% of fair value as of Dec. 31. While the move was telegraphed late last year, shares nonetheless plunged to the lowest level since 2020.<\/p>\n
SLR Investment Corp. went so far as to lay out the case for why it could be \u201cviewed as a safe haven\u201d among BDCs: Its loan portfolio has just 2% allocated to software.<\/p>\n
Over at Ares, Kort Schnabel insists they are eyes wide open to the AI risk \u2014 yet confident they\u2019ll withstand the turmoil.<\/p>\n
\u201cAI is probably the most disruptive technology risk that we could have imagined and it absolutely is going to disrupt a lot of software companies,\u201d Schnabel, head of Ares Capital Corp., said during an earnings call. \u201cI don\u2019t want to sugarcoat it. But we still believe strongly that we\u2019ve constructed a portfolio that will remain highly resistant to this risk.\u201d<\/p>\n
Deals<\/p>\n
A lender group led by JPMorgan Chase & Co. is preparing to raise $5.3 billion of debt to support Qualtrics International Inc.\u2019s purchase of health-care survey firm Press Ganey Forsta<\/p>\n
Affinity Education Group Ltd., an Australian childcare provider owned by Quadrant Private Equity, has completed an A$650m loan with existing lenders for refinancing purposes<\/p>\n
HPS Investment Partners led a roughly $700 million private-credit deal for Elara Caring, a home health-care provider<\/p>\n
Fundraising<\/p>\n
Dan Loeb\u2019s Third Point plans to launch a pooled fund for private credit loans in April, as the firm expands its push into direct lending<\/p>\n
Ares Management Corp. priced its second European direct lending collateralized loan obligation, doubling the total number of private credit CLOs in the region as investors warm to the nascent asset class<\/p>\n
Qatar\u2019s $580 billion sovereign wealth fund is investing in a private credit firm run by former Goldman Sachs Group Inc. partners Tom Connolly and Michael Koester<\/p>\n
Job Moves<\/p>\n
Joshua Easterly, who co-founded and helped build Sixth Street Partners into a more than $125 billion private capital manager, is retiring from the San Francisco-based firm<\/p>\n
Indonesia Investment Authority\u2019s Co-Chief Investment Officer Andry Setiawan has resigned, deepening a leadership vacuum at the country\u2019s first sovereign wealth fund and raising questions about its future direction<\/p>\n
Did You Miss?<\/p>\n
BDC With 2% Software Exposure Pitches Itself as a \u2018Safe Haven\u2019<\/p>\n
Blackstone Private Debt Fund Sees More Stress in Software Asset<\/p>\n
Mid-Sized Private Debt Downgrades to Outpace Upgrades, S&P Says<\/p>\n
Private Credit Fears Deepen With UBS Warning of 15% Defaults<\/p>\n
US Private Credit Default Rate at Record 5.8% in January: Fitch<\/p>\n
BDCs Shifting Loans to CLOs Masks True Leverage Risks, Citi Says<\/p>\n
Blue Owl Sold Loans to Pensions, Own Insurance Asset Manager<\/p>\n
BofA Commits $25 Billion of Its Own Cash to Private Credit Deals<\/p>\n
Blue Owl May Dent Sentiment, Not \u2018Canary in Coal Mine\u2019: Endowus<\/p>\n
Blue Owl Criticized by Warren Over Restricting Some Withdrawals<\/p>\n
–With assistance from Rene Ismail and Olivia Fishlow.<\/p>\n
Most Read from Bloomberg Businessweek<\/p>\n
\u00a92026 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) — Even in the world of private credit, which for months has pitted skeptics against true believers…\n","protected":false},"author":2,"featured_media":319171,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64276,127924,971,8127,24193,148688,148686,72,113,61,60,9207,148687,148685,131627,29741,21324],"class_list":{"0":"post-319170","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-2008-financial-crisis","9":"tag-asset-manager","10":"tag-bloomberg","11":"tag-bloomberg-tv","12":"tag-blue-owl-capital-inc","13":"tag-boaz-weinstein","14":"tag-bruce-richards","15":"tag-business","16":"tag-economy","17":"tag-ie","18":"tag-ireland","19":"tag-jamie-dimon","20":"tag-jason-alden","21":"tag-marathon-asset-management","22":"tag-mohamed-el-erian","23":"tag-money-manager","24":"tag-private-credit"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/319170","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=319170"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/319170\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/319171"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=319170"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=319170"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=319170"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}