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Defaults Expose Cracks in High-Flying Private Credit
Newser • • business
Key Points:
- Loan defaults at major private-credit funds run by Ares, Blackstone, Blue Owl, Golub, and KKR have reached their highest levels since at least 2021, signaling growing stress in the sector despite executives downplaying concerns.
- Blue Owl reported a 2.8% default rate in the second quarter, the highest in five years, while nonperforming loans are rising notably in healthcare and energy sectors across competitors.
- Internal watchlists of risky borrowers at Ares, Golub, and KKR have expanded to levels not seen since the last Federal Reserve rate-hike cycle, indicating potential future credit troubles amid a still-resilient US economy.
- Returns on private-credit investments, once consistently above 10%, are declining toward 7% or lower, challenging the sector’s appeal to wealthy investors seeking strong yields.
- The tension between optimistic public statements and deteriorating credit metrics suggests a brewing reshaping of the private credit landscape, as detailed in the Wall Street Journal analysis by Matt Wirz.
