The private credit market is cracking. Default rates hit 9.2%, meaning one out of every eleven loans made by non-bank lenders is now in serious trouble.
This isn't a slow burn - it's a sudden shock to a $1.7 trillion market that most investors thought was bulletproof two years ago.
Private credit means loans made directly by investment funds instead of banks - think Apollo, Ares Management, and Blackstone.
After 2020, this market exploded because traditional banks got cautious and companies loved borrowing from deep-pocketed funds with fewer restrictions.
The problem: these lenders made risky bets on companies drowning in debt, and those companies can't pay.
Redemption gates are activating - that's finance-speak for "your money is locked up right now." Funds are locking investors out while demanding repayment or immediate asset sales.
Real estate companies and software firms with leveraged loans - debt that exceeds normal borrowing limits - are being forced to sell assets to survive.
Morgan Stanley projects defaults could climb even higher while distressed debt buyers circle with over $100 billion ready to deploy.
Monitor which real estate companies start announcing asset sales over the next 90 days - those announcements will signal how deep this squeeze goes.
