Don't just focus on Iran; the US private credit crisis is gradually replaying the "subprime mortgage crisis."

Source: Wall Street Insights

As market focus shifts to geopolitical risks, a quietly spreading private credit crisis is accelerating within the U.S. financial system. Redemption waves, asset sell-offs, fund closures—this script was seen by investors in 2008.

This week, the world’s largest asset manager, BlackRock, announced restrictions on redemptions for its $26 billion HPS Corporate Lending Fund (HLEND), marking the most impactful signal to date.

Previously, Blackstone’s private credit funds experienced a record 7.9% redemption request, and Blue Owl’s stock price fell below its SPAC IPO price.

Three private credit giants are facing urgent trouble, and a vicious cycle is already in motion.

Meanwhile, PIMCO warned in its latest client report that the direct lending industry is heading into a “full default cycle,” with stress testing unavoidable. This judgment comes from long-time critics of private credit and carries significant weight.

The spread of the private credit crisis is directly reflected in the stock prices of related publicly traded companies. Blue Owl’s stock has fallen below its SPAC IPO price, and valuations of private credit-related businesses at Blackstone, BlackRock, and others are under pressure. The entire industry is facing a systemic reassessment of investor confidence.

01 Closure: BlackRock “Limits Redemptions” for Its Private Credit Fund

According to Wall Street Insights, BlackRock issued a statement on Friday saying that shareholders of its HPS Corporate Lending Fund (HLEND) requested to redeem 9.3% of their shares, but the fund management decided to cap repurchases at 5%, approximately $1.2 billion.

BlackRock characterized this move as a “fundamental” liquidity management measure, stating that without restrictions, there would be a “structural mismatch” between investor capital and the duration of private credit loans.

The language sounds calm, but the market understands the implications: if full redemption were honored, BlackRock would have to initiate a large-scale asset sell-off.

Earlier, another BlackRock private credit division had already sent warning signals—BlackRock TCP Capital Corp. in its Q4 report wrote down a $25 million loan to Infinite Commerce Holdings from full value to zero, just three months after it was marked at face value. From 100 to 0 in three months, with no warning.

02 The Fire Spreads: Sell-offs Trigger a Vicious Cycle

BlackRock’s closure isn’t an isolated event but the end—or perhaps the beginning—of a chain reaction.

Three weeks ago, Blue Owl Capital took the lead.

Faced with a large number of redemption requests—mainly due to its high concentration in software loans, which are rapidly devaluing amid AI disruptions—Blue Owl announced the sale of $1.4 billion in private credit loans to restore quarterly redemption mechanisms, effectively freezing investor funds.

The company emphasized that all assets to be sold are rated at the highest internal risk level (Level 1 or 2 on a five-tier scale).

However, this “selling off high-quality assets first” strategy is actually accelerating the crisis. If secondary market buyers only want high-quality assets, other business development company (BDC) portfolios will face even thinner liquidity. It’s reported that NMFC is working on selling about $500 million of its portfolio, representing 17% of its total investments as of Q3 2025.

Blackstone’s situation is similarly severe. Its private credit fund BCRED manages $82 billion, with a record 7.9% redemption request this quarter—exceeding the legal limit of 7%. To avoid triggering a closure, Blackstone employees were asked to personally subscribe $150 million to fill the gap.

Three institutions, three responses, but the same logic: closure or de facto closure to prevent forced sales that could cause a larger valuation collapse. Analysts note that BlackRock’s decision to restrict redemptions itself sends a very strong panic signal to the market, potentially triggering more investors to rush for the exits.

03 Blue Owl: Stock Price Falls Below IPO Price, Risk Exposure Continues

As the epicenter of this crisis, Blue Owl Capital’s situation continues to worsen. Its stock dropped below $10 this week, hitting a three-year low.

According to Bloomberg, citing sources, Blue Owl has a $36 million exposure to London-based real estate lender Century Capital Partners Ltd.—a risk exposure indirectly created through its acquisition of Atalaya Capital Management in 2024.

Century filed for bankruptcy last month, with total liabilities of about £95 million. Its senior creditors include NatWest Group and Hampshire Trust Bank.

Blue Owl holds the riskiest subordinate tranches of Century’s loan portfolio. Century’s administrator, RSM UK, expects to recover the senior loans in full, but the fate of the subordinate tranches remains uncertain.

This incident reveals another side of the private credit expansion: asset-backed financing, once seen by industry leaders as a growth frontier—PIMCO, Carlyle Group, Marathon, and Blackstone’s executives have all publicly praised this sector. Now, the risks are surfacing in unexpected ways.

04 PIMCO Warns: A Full Default Cycle Is On the Horizon

Amidst the market’s alarm, PIMCO analysts Lotfi Karoui and Gabriel Cazaubieilh issued the most direct warning yet in their latest client report. They wrote:

“Like every mature segment of the leveraged finance market, direct lending will ultimately face a full default cycle—one that will test its resilience against industry-specific shocks and macroeconomic impacts.”

PIMCO has long been a critic of private credit. As the direct lending strategy’s fundraising soared, this $2.3 trillion asset manager has taken a contrarian stance, actively seeking potential issues within private credit-supported companies.

Their analysis highlights several core risks:

First, record-breaking fundraising since the 2008 financial crisis has led to looser underwriting standards.

Second, the high concentration of software industry exposure in direct lending portfolios will drag performance down amid AI disruptions.

Third, direct loan funds have long failed to provide sufficient risk premiums to lock in investor liquidity.

Regarding liquidity challenges faced by BDC investors, PIMCO’s words are blunt: “Semi-liquidity does not equal full liquidity. Investors must assess their own liquidity needs and tolerance for capital restrictions.”

However, PIMCO also differentiates within private credit, believing that segments like asset-backed financing still offer investment-grade risk levels. Last year, PIMCO raised over $7 billion for its asset-backed financing strategies.

05 Repeating the Subprime Crisis?

The structural logic behind this cycle isn’t complicated: semi-liquid products promise quarterly redemptions, but their underlying assets are longer-duration private loans; when redemption requests exceed thresholds, managers either close the fund or sell assets; selling depresses asset prices, triggering further valuation drops and more redemptions—a vicious cycle.

This logic played out in the 2008 subprime mortgage market. The initial cracks appeared in a corner of the market once considered “diversified and professional.”

Today, the private credit market has grown to $1.8 trillion, and the risks—concentration, opaque valuations, and liquidity mismatches—are being tested in a similar manner.