The private-credit party’s getting awkward
Private credit was supposed to be the cool kid on Wall Street — flexible lending, juicy yields, and fewer pesky public-market rules. But new MSCI data suggests the hangover is here: more than 10% of loans in the market have been marked down by at least 50% as borrowers wrestle with heavier debt loads.
That’s not exactly the vibe you want in a $3.5 trillion market. When lenders start cutting loan values that aggressively, it usually means they’re seeing more signs of stress under the hood — weaker cash flows, refinancing risk, or businesses that looked fine when rates were near zero but now feel like they’re running a marathon in cement shoes.
Why investors should pay attention
This matters beyond the private-credit world because the pain can ripple outward:
- Borrowers may face tougher refinancing terms, covenant pressure, or even restructuring.
- Lenders and funds could see lower returns if those markdowns turn into real losses.
- Public markets may catch a cold if private credit starts acting less like a niche and more like a stress signal.
The big picture
Private credit helped fill the gap left by banks, but the bill always comes due eventually. If borrowers keep getting squeezed, the market’s “alternative” label may start sounding a lot less charming and a lot more like code for “we’ll worry about that later.”
Big picture: when a market built on confidence starts marking down loans this hard, everyone from fund managers to leveraged borrowers has to brace for a less forgiving mood.