Private credit managers and business development companies have started to write down portions of their loan books in response to mounting investor concerns about credit quality and market sentiment. Filings from 14 major BDCs that lend mainly to smaller businesses show widespread markdowns in private credit portfolios during the first quarter.
An aggregated measure presented in those filings shows the fair-value-to-cost ratio fell by 103 basis points to 98.55% at the end of March. At that level, the review found, portfolio holdings were collectively marked to roughly $1.2 billion below their amortized cost.
Managers who commented alongside the filings attributed part of the pressure to market-wide spread widening rather than pure borrower deterioration. Still, the numbers reflect investor unease tied to a mix of factors noted in the disclosures, including concerns about artificial intelligence disruption to software borrowers, a rise in non-accruals and continued redemption pressure at some vehicles.
Certain funds showed more pronounced downward moves. The filings and related commentary highlighted material fair-value declines at CION, Ares, Blackstone Secured Lending and the Goldman Sachs BDC.
Independent industry data reinforce the picture of concentrated stress. MSCI reported that more than one in ten private-credit loans it tracks have been marked down by at least 50%. MSCI characterizes that 50% threshold as typically associated with deep distress or restructuring risk, and it said the stress is concentrated in smaller private-debt funds. In those smaller vehicles, MSCI found that 13% of loans were valued below 50 cents on the dollar.
Signs of continued funding strain appear in subscription activity at retail-facing private credit funds. Blue Owl reported a 95% drop in new investments at its largest credit fund for retail investors, accepting $26.4 million in subscription payments on May 1, compared with $480 million at the same point last year.
Lenders and banks tied to private credit also disclosed losses and capital movements. HSBC said it remains committed to its private credit investments after reporting a loss tied to a collapsed bridging lender. That collapse resulted in a $400 million loss disclosed by HSBC following the failure of Market Financial Solutions, which had pledged the same assets as collateral to multiple lenders.
Goldman Sachs flagged a 3.7% decline in value at one of its private credit funds in the first quarter, driven by an increase in unrealized losses. Separately, KKR said it plans to inject $300 million into FS KKR Capital as losses and credit problems mount at that private-credit fund.
Regulatory scrutiny is also evident. Britain’s financial regulator has held discussions with major private-credit groups about overhauling reporting requirements, according to reporting on those talks. Firms involved in the discussions included Apollo, Blackstone, Carlyle, Goldman Sachs Asset Management and KKR. Several of those firms have already agreed voluntarily to provide data to the Bank of England for a planned stress test covering global private equity and private credit industries.
Contextual note on investment commentary included in filings
One item included in the filings and related investor materials is an AI-driven investment product blurb assessing Goldman Sachs as an equity investment. That piece notes an AI tool that evaluates GS along many financial metrics and promotes the tool's ability to generate stock ideas based on current data. The mention sits alongside the disclosures about private credit markdowns and fund performance in investor communications.
The current mix of markdowns, concentrated loan distress in smaller funds, reduced subscription flows and heightened regulatory dialogue signals an environment in which managers and investors are reassessing valuations and transparency expectations across private credit.