Key facts
- Credit market participants warn of an impending shakeout.
- The shakeout is expected to affect leveraged deals and direct-lending funds.
- Investor withdrawals from these funds have been ongoing.
- Concerns exist about the viability of deals made in prior years.
- Holly Kim stated private credit faces a backlog of defaults.
Credit market participants, referred to as 'credit titans,' are warning of an impending shakeout. This shakeout is expected to impact leveraged deals and direct-lending funds, which have been experiencing sustained investor withdrawals. Concerns are mounting regarding the viability of deals originated in previous years. Holly Kim, co-founder of Glendon Capital, stated that the private credit industry faces a significant 'backlog of defaults,' independent of broader economic dislocations or inflation-related factors. She made these remarks at the Bloomberg Global Credit Forum in New York. GoldenTree Asset Management Founder and CIO Steven Tananbaum also stated at the forum that the credit market has "languished" but acknowledged pockets of opportunity.