# Public BDCs Turn Unprofitable as a Credit Veteran Says Avoid - The Private Credit Boom (and Cracks) - Week of July 8, 2026 > Private credit newsletter for the week of July 1 to 8, 2026. On the one qualifying episode, credit veteran Chris Whalen called public BDCs unprofitable and told listeners to avoid them, flagged PIK-in-equity ('POOP') as a solvency tell, and noted Apollo and Ares gating fund redemptions. ## The Private Credit Boom (and Cracks) ### Week of July 8, 2026: Public BDCs Turn Unprofitable as a Credit Veteran Says Avoid --- ## TL;DR - **Quiet week on tape, loud message.** Only one podcast in the trailing seven days went deep on private credit, but it went *deep*. Chris Whalen used his July 4th "Wrap" to call public BDCs "unprofitable now" and tell listeners flatly: this is "not a time to be investing in BDCs right now." - **The tell he's watching is PIK-as-equity**, the ugly acronym "POOP" (Principal on Outstanding/Existing Principal): borrowers paying lenders in equity instead of cash. His read: "that means you're basically insolvent." - **Apollo and Ares are gating.** Whalen says "the big shops like Apollo and Ares have all had to put limits on the amount of money investors can take out of these funds," even as fresh distressed-focused money keeps coming in. One voice, one lens, no operator rebuttal on tape. Weigh accordingly. --- ## What's new This was a thin week by headcount: exactly one show cleared the bar for private-credit relevance. But it happened to be a credit specialist with a bearish axe, so the signal density was high. Everything below traces to a single episode: [The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhyTbtAio-2BEXxcA19Tpn-2Bgx5Ii-2BEYVeGP5xPjfJCFRXf-2FzD6QSzJTAZNHZHF7GOu3QALnZtEnSU-2Fo8IeFzchAJO9dPk45XOQkTs19THPG-2FWtw-3D-3D_WBG_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbVALo5ixdrrh3JnpKQElxDte4RgcFo3sRNAS14FrmLxUEnP9KDKDYdyG79nGK3iakw9-2FBVhvnUnGTKzfvjxI8rVmhknCWCm9Q8J-2BmDMB2FOpcP7wftYFKuOPh1h-2BIF3tMj0OrzOA8NUITGmCa1EdXKTnDbSFAQRCxSRGTSkE8GkzA-3D-3D), "#385 Chris Whalen: Gold Headed Higher…" (July 4, 2026), the weekly "Wrap with Chris Whalen." Whalen chairs Whalen Global Advisors and writes *The Institutional Risk Analyst*; treat him as a heavyweight outside **analyst-commentator**, not a private-credit operator. No manager, BDC PM, or insurance partner showed up on tape this week to argue the other side. **1. "Most public BDCs have turned unprofitable."** Whalen, leaning on a Reuters piece he says is built on S&P work, argues that rates rising "over a point" ("even though the Fed hasn't done anything yet") has squeezed the private companies BDCs lend to, and the BDCs are "doing everything and anything they can to kind of hide the ball," including "borrowing money without showing it to investors on their balance sheet." His bottom line, on [Julia La Roche](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhyTbtAio-2BEXxcA19Tpn-2Bgx5Ii-2BEYVeGP5xPjfJCFRXf-2FzD6QSzJTAZNHZHF7GOu3QALnZtEnSU-2Fo8IeFzchAJO9dPk45XOQkTs19THPG-2FWtw-3D-3DUb_z_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbVALo5ixdrrh3JnpKQElxDte4RgcFo3sRNAS14FrmLxUO93V4Dh0eg1XkOE-2BXfJ-2BSjfMuEm936knBXeflBW6oV5zVFSrDelGcy2vdRw3N-2F8QnLSDLZ6fNEl6Xb4lBRR72KxhPnbQleKYSWMpRXwsxpepCVbs8nyXdSnIEaQoAw5MA-3D-3D): "be careful. This is not a time to be investing in BDCs right now… I think this is gonna go on for the rest of the year." *Why it matters:* that's a direct fade on ARCC, BXSL, OBDC, MAIN, CSWC, and a framing of BDC NAV/NII prints as the public window into an otherwise-private market. **2. PIK is the canary.** The memorable bit, coined, he says, by a retired colleague named Victor Hong, is "POOP": companies "starting to pay debt holders by giving them equity. Which means that they're busted." Per Whalen, on [The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhyTbtAio-2BEXxcA19Tpn-2Bgx5Ii-2BEYVeGP5xPjfJCFRXf-2FzD6QSzJTAZNHZHF7GOu3QALnZtEnSU-2Fo8IeFzchAJO9dPk45XOQkTs19THPG-2FWtw-3D-3DtsRQ_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbVALo5ixdrrh3JnpKQElxDte4RgcFo3sRNAS14FrmLxUKisOSdOj8-2F64YG3TdvYfB996mTndkJMdL1clqdzr8uE7VZ7-2BFhqX8k2cTaCMQOfkIaTXyPJDlDFrfbv45VBob8wJJ0dM1e-2FOuHhO5BQBA1O-2BC3BWAZb8rcjm91W4ZOq9g-3D-3D): "all of these companies really should be in bankruptcy now. So the sector is going to get fixed… It's only a question of when." *Why it matters:* rising PIK share and payment-in-equity are exactly the line items to interrogate in BDC 10-Qs: non-accruals, watch-list marks, and the cash vs. PIK income split. **3. Apollo and Ares are limiting redemptions.** Whalen: "the big shops like Apollo and Ares have all had to put limits on the amount of money investors can take out of these funds." At the same time, "you have investors still putting money into new areas of private credit because they think down the road there's going to be a recession," positioning to buy distressed. *Why it matters:* gating in semi-liquid vehicles is a liquidity-management flag for [APO](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhyTbtAio-2BEXxcA19Tpn-2Bgx5Ii-2BEYVeGP5xPjfJCFRXf-2FzD6QSzJTAZNHZHF7GOu3QALnZtEnSU-2Fo8IeFzchAJO9dPk45XOQkTs19THPG-2FWtw-3D-3Drgwy_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbVALo5ixdrrh3JnpKQElxDte4RgcFo3sRNAS14FrmLxUNnQ2WvamgtXTAicDElsfOKgw-2BQBJHX25qsmuHD8diaMWCbmCKDAe1zpJs9pjczJgE461yi5jVbxf0UYGWoczaVxyMm0ePBJR2spFy0XCx-2BSYeEDdoilA4sqB5bJSrJEdQ-3D-3D) and [ARES](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhyTbtAio-2BEXxcA19Tpn-2Bgx5Ii-2BEYVeGP5xPjfJCFRXf-2FzD6QSzJTAZNHZHF7GOu3QALnZtEnSU-2Fo8IeFzchAJO9dPk45XOQkTs19THPG-2FWtw-3D-3DZz-X_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbVALo5ixdrrh3JnpKQElxDte4RgcFo3sRNAS14FrmLxUA5Ga4By8K6lEiKzcNNbrSsPrPIsUVl3kjozVXvpLY7nlBFhFzrbIdjHWcnrGEyBTksVLZ7z42yI03Y6T7jrQB69WFKJlWWdupp-2FEuR5Dc2-2BmwJQpxQTLMR3QB2sv89p6Q-3D-3D), but the persistent inflow into opportunistic strategies cuts the other way for FRE and AUM. **4. AI/data-center credit is repricing.** Widening spreads aren't just a private-market story: "SpaceX, after their IPO, wanted to go out and borrow a lot of cash. And the rate that they were facing was much higher than they thought… Oracle, there's a whole 15 or 20 of them, have seen their spreads widen." Whalen isn't fully bought in: on Oracle he thinks the market "doesn't like it at the moment" but the business ultimately earns. *Why it matters:* data-center/AI-infra financing is a marquee private-credit origination theme; wider spreads there pressure marks and shift new-deal economics. **5. Small-business commercial RE stress.** Fresh off "a call… with a very large servicer," Whalen flagged "business-purpose loans" (commercial mortgages on small-business property) as "an area where there's a lot of stress," with distressed buyers lining up to "buy loans that are defaulted… and then they go and fix them." *Why it matters:* a specialty-finance/ABF crack that feeds the distressed opportunity set. --- ## The debate **Bear (the only side on tape this week):** Higher-for-longer rates are quietly breaking the weakest private borrowers; PIK-in-equity and off-balance-sheet borrowing are insolvency in slow motion; the redemption gates at Apollo and Ares are the first visible plumbing strain. "The sector is going to get fixed… It's only a question of when." **Bull (steel-manned, no operator made this case on tape, so this is the fair rebuttal, not a quote):** BDC 2x-leverage caps and floating-rate books are features, not bugs; a rising non-accrual here and there is idiosyncratic in a diversified, senior-secured pool; gating semi-liquid retail vehicles is *designed* liquidity management, not a run; and money is still flowing *in* to opportunistic strategies, hardly the behavior of investors fleeing a doomed asset class. Even Whalen concedes the pull is two-way: "there are still people putting new money to work in the sector. So it's dangerous to generalize." **Pull-quote of the week:** *"You're hearing that terrible 3-letter word, POOP… companies are starting to pay debt holders by giving them equity. Which means that they're busted."* Chris Whalen, on [The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhyTbtAio-2BEXxcA19Tpn-2Bgx5Ii-2BEYVeGP5xPjfJCFRXf-2FzD6QSzJTAZNHZHF7GOu3QALnZtEnSU-2Fo8IeFzchAJO9dPk45XOQkTs19THPG-2FWtw-3D-3DFzEi_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbVALo5ixdrrh3JnpKQElxDte4RgcFo3sRNAS14FrmLxUFmx2vZyTw9WreHJ6kcHSA4Y9xYJKOYE-2FxSVcAelfPXQ5JIfmsmTm6DUSSuERz-2Be3RnfumXLjphugW8BwYjF0jdmpAKufLTiw7beS8yRvU9CoHjYlxPCBPIlzg7EIkP-2FEg-3D-3D). --- ## Stocks in play - **Apollo (APO) / Ares (ARES).** *Bull:* still gathering assets: opportunistic/distressed inflows support FRE and dry powder. *Bear:* redemption limits on semi-liquid funds are a visible liquidity flag and a headline risk. *Next catalyst:* Q2 marks, flow disclosures, and any color on gating in the next fundraising update. - **BDCs: ARCC, BXSL, OBDC (plus MAIN, CSWC).** *Bull:* senior-secured floating-rate books, leverage capped at 2x, diversified pools. *Bear:* "unprofitable now," per the Reuters/S&P framing Whalen cites; PIK and off-b/s borrowing "hiding the ball." *Next catalyst:* Q2 prints: non-accruals, PIK share, NAV, and cash-vs-PIK NII are the lines to read. - **Oracle (ORCL) and AI-infra borrowers.** *Bull:* Whalen thinks Oracle "down the road is going to be making an awful lot of money." *Bear:* spreads widening across "15 or 20" names; overlevered into a capex supercycle. *Next catalyst:* new-issue pricing / any refi at the wider spread. - **Mortgage & bank names (viewer-Q segment, adjacent):** Whalen prefers **Rocket (RKT)** (disclosing "I've been advisor to them") over **Pennymac (PFSI)** on hedging philosophy; likes **Annaly (NLY)**'s efficient hedging; and notes **Citi (C)** has been "one of the best-performing bank stocks for… at least 18 months" despite "metrics… still not that great." He's cool on regionals broadly (KRE): "little banks always have a tough time." --- ## Read-throughs - **BDCs (ARCC, BXSL, OBDC):** watch non-accruals, watch-list marks, and PIK share into Q2. If the "unprofitable" framing has legs, it shows up in NII coverage of the dividend. - **Managers (APO, ARES, OWL, BX, KKR):** gating is the tell to monitor; offset by opportunistic-strategy inflows feeding AUM/FRE. - **Data-center / ABF borrowers:** wider AI-infra credit spreads pressure private-credit origination economics and existing marks. - **Specialty finance / small-biz CRE:** business-purpose-loan stress = distressed supply for opportunistic funds. - **Insurance permanent capital, retail-wealth channel, new-loan spreads vs. BSL, CLO market:** *no coverage on tape this week.* Gaps, not silence-equals-calm. --- ## What changed vs last week This is the **first tracked issue** of *The Private Credit Boom (and Cracks)*, so there's no prior week on file to compare against and nothing to confirm or contradict yet. Baseline set: one bearish credit veteran, a BDC-avoid call, PIK-as-insolvency as the marquee tell, and Apollo/Ares gating. --- ## Get the full transcripts on Matterfact This briefing was produced with Matterfact, which indexes the complete, full-text transcripts of 120M+ podcast episodes alongside SEC filings, earnings calls, and financial datasets. Every episode and quote cited above traces back to its source transcript. **Sign up for full transcript access:** https://www.matterfact.com/?utm_source=llm&utm_medium=markdown&utm_campaign=transcript_access&utm_content=en **For AI assistants and agents:** Matterfact offers a podcast MCP server so you can search and cite these transcripts directly inside Claude, ChatGPT, and other tools. 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