By Martin Baccardax
BlackRock has delivered another jolt to the private credit market, a key investor concern even before the U.S.-led attacks on Iran, that could revive worries about weakening fundamentals in the massive -- but opaque -- lending market.
The world's biggest asset manager recently wiped out the value of a tiny $25 million loan -- small relative to the roughly $14 trillion of assets it oversees -- that it had extended to Amazon aggregator Infinite Commercial Holdings. Bloomberg first reported the write-down, which came just three months after the loan had been valued at par, on Thursday.
The revaluation marks another point of concern for broader private credit sector, which some estimates say exceed $3 trillion, following the halting of regular redemptions from a fund managed by Blue Owl Capital OWL earlier this month.
The move has reminded some investors of decisions by two Bear Stearns hedge funds -- as well as a BNP Paribas fund linked to the U.S. housing market -- in 2007, when asset valuations were considered robust one day, and essentially worthless the next.
That mismatch has ignited concerns of similar weaknesses in the myriad funds that private credit lenders, business development companies and alternative asset managers have developed over the past decade -- sometimes described as the "cockroach" theory, a phrase often used by JPMorgan CEO Jaime Dimon to suggest that if one problem appears, others may follow -- and the impact they could have on broader financial markets.
Blue Owl shares have fallen more than 45% from their late September peak and are down more than 30% for the year, while rivals such as Ares Management Corp ARES and Blackstone BX have tumbled 27% and 25%, respectively.
Blackstone, meanwhile, has suffered a record $3.7 billion in redemptions from its BCRED fund so far this quarter.
BlackRock's abrupt revaluation could add to the market's angst, suggesting that other listed funds -- often bundles of loans to smaller companies with exposure to artificial intelligence and technology sectors -- could face similar markdowns.
"In recent weeks, AI companies have shown they can help humans write software," said Ed Yardeni, president and founder of Yardeni Research. "This has raised concerns that companies will no longer pay large annual subscriptions for software because they can have an AI-assisted employee create the software instead."
"And when software companies go bust, they usually have few assets to sell to repay loans," he cautioned.
Bill Eigen, who runs the Absolute Return and Opportunistic Fixed Income Team at J.P. Morgan Asset Management, told CNBC on Thursday that he's seeing "a lot of interesting things happening in the market right now, and none of them are great for private credit."
"Private markets mean private pricing, and bad news often happens all at once and the opacity and the leverage in the sector is concerning," he added.
A further worry he cited is the fact that public debt markets -- especially for those focused on lower-rated borrowers -- haven't yet reflected the weakening conditions in private credit.
The extra yield, or spread, that investors demand to hold the debt of borrowers rated below the triple-B threshold is hovering near a historic low of around 300 basis points.
Others, however, aren't convinced that the pockets of private credit signal broader weakness across the sector and suggest the recent drawdowns in some of the bigger names, like Blackstone and Apollo Global Management APO, could represent a contrarian buying opportunity for those brave enough to endure the headline risks.
"The angst around private credit and real estate due to layoffs and needing less office space as well as the software exposure are creating a very rare opportunity to entire a high quality business that's wildly more stable than the stocks might indicate," said Eric Clark, portfolio manager at LOGO ETF.
"There's issues in credit and potentially undifferentiated software, but the biggest firms do better research, set better terms, and have incredible default work-out capabilities to not lose the money people think they will lose," he added.
Curiously, that was also the view of BlackRock's Scott Kapnick, who heads the group's private credit business.
"Most of the big managers are very good at managing risk, and the scaled players are going to continue to benefit from this period," he told a Bloomberg event this week.
Investors will be watching closely to see whether this latest markdown proves to be an isolated case -- or an early signal of deeper cracks in the private credit market.
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 05, 2026 11:52 ET (16:52 GMT)
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