# Private Credit Lenders Concede Cracks as Default Recoveries Fall to 33 Cents - The Private Credit Boom (and Cracks) - Week of September 16, 2026 > The Private Credit Boom (and Cracks) for the week of September 16, 2026. Podcast synthesis on Brookfield, Ares and Golub finally speaking for the lenders, Brookfield's warning that default recoveries have fallen from 60 cents to 33 cents, the 5 percent redemption gate jamming semi-liquid BDCs, Blue Owl's Loparex loan going from par to near zero, and private credit money flowing into AI infrastructure. ## The Private Credit Boom (and Cracks) ### Week of September 16, 2026: Private Credit Lenders Concede Cracks as Default Recoveries Fall to 33 Cents --- ## TL;DR - **The people who actually run the money finally talked.** After weeks of nothing but pundits and short-sellers, this week we heard from three of the biggest lenders themselves (Brookfield Credit's co-CEOs, Ares' head of credit, and Golub Capital's founder), and they did something unusual: they admitted the problems are real, then explained why they think their own books are fine. - **The single scariest number came from an operator, not a bear.** Brookfield's Armen Panossian said that when a loan defaults today, lenders are recovering about **33 cents on the dollar, versus a 25-year average of 60 cents.** That is the whole ballgame: defaults matter far less than how little you get back when they happen. - **The redemption story got a mechanical explanation.** Semi-liquid BDCs promise investors up to 5% of their money back each quarter, and "most of the semi-liquid BDC market has hit that 5% threshold" for a couple of quarters running. That's a plumbing problem (too many people want out at once), which the bulls insist is different from a credit problem (the loans going bad). --- ## What's new **1. The operators broke their silence, and conceded the cracks.** The most important thing that happened this week is a change in *who* was talking. For a month, this newsletter has been filled with macro commentators and short-sellers. This week, on Oaktree's own podcast *The Insight* ([episode: "Crossroads," Sept 10](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhXqhn6P8EI-2FBhrMxCDCvnZFwI8r6DpASoQgXJWEGREL3TPIqcAy-2B-2FhW6Pg57XkhPXuDXNHL-2BaxrHk-2BPwYG1XNeG8E8paO9CVugmY1m9xOrmA-3D-3DDBey_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXSnqDWch4EUzR8QWqY6chd8soaaPvnVsbHcnmwmwJ1NgQhOxabb0WjJ4xIvsloub9RtZk1iH44wJzKzKNr-2BSnQTUa0FmEA85SL6-2F2-2BktLhCqKAiVqaU0CJ3hN5OX6rv-2FFjIhvTgusxww4V-2FavFU8oa3UH4oUYfLN4wEGKeRxCtUCEzlkZG33VK8GSBkNWHE-2FU-3D)), the two new co-CEOs of Brookfield's credit arm, **Armen Panossian and Bob O'Leary**, sat for a client webcast and refused to wave it all away. In O'Leary's words: *"I don't think either Armin or I are here to tell you that there's not a problem. I think some folks are trying to say there's nothing here. We do think there are a few problems."* Why it matters: when the sellers of a product start naming its flaws in public, the debate stops being "bulls vs. bears on Twitter" and starts being about specifics. And the specifics were sobering (see the debate section below). **2. Recovery rates have collapsed from 60 cents to 33 cents.** The number that should stop any BDC investor cold came from Panossian on the same [Brookfield/Oaktree podcast](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhXqhn6P8EI-2FBhrMxCDCvnZFwI8r6DpASoQgXJWEGREL3TPIqcAy-2B-2FhW6Pg57XkhPXuDXNHL-2BaxrHk-2BPwYG1XNeG8E8paO9CVugmY1m9xOrmA-3D-3DG93F_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXSnqDWch4EUzR8QWqY6chd8soaaPvnVsbHcnmwmwJ1NnI-2BSp9otLxAfEN4RDRnxZIH5YVIbYD5ukHgt4VbUER1mulX61NlehGwa0oGw2Lj0YdfPQXrLKm-2BMvvn-2FDrlbpECrx2xUrcGYTq7Bq-2FqDOjC3gFN9woeW6vxVfOWtmLOi78dTC3Mvq0xCbJlg3pxOqM-3D): *"the 25-year average recovery rate was around $0.60. Today, it's more like $0.33."* In plain English: historically, when a loan went bad, lenders eventually got about 60% of their money back. Now they're getting about a third. The reason, he argued, is that struggling companies today are being kept on life support through "amend-and-extend" deals and other maneuvers instead of being fixed, so by the time they finally fail, they've been "starved of cash" and there's less left to recover. Defaults are rising, but *loss severity* (how much you lose per default) is the real problem. **3. Ares says the wealth money isn't running, it's still coming in.** The bull counterweight came from **Kipp deVeer, who runs credit at Ares** (the manager behind BDC giant ARCC), on *Dry Powder* ([episode: "Looking Beneath the Private Credit Headlines," Sept 9](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjTdb5kSZ0e0T4wEsujDB1DFnNBB81vM-2FUUbdr8TcgKYZXqi0YxcUhxbL2XX-2Bx7s-2Bi2TAqGzCvKcQkJFSnTlI1AuU-2FhCFv-2Bjp15oFlZEeAVDA-3D-3DiOgc_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXSnqDWch4EUzR8QWqY6chd8soaaPvnVsbHcnmwmwJ1NjXyx2KcbETLwi2CIJPytqlENFJqs-2FaCfChaOd5uJM2tqGdOZP-2BGXYrp3PlhQyH25KGM1YozAcArNv-2BDAzEP8PEltAbKB8raZw7msLi6uWla9vj3EYHT24H64uEwkHXaWrRUwaVX0hocl166yF1njpk-3D)). His headline claim: *"We're actually out raising our fourth commingled... direct lending fund. So despite some of the... non-traded BDC redemptions and all that, we're actually seeing tremendous interest from our institutional investors."* And on the retail panic specifically: *"most of the U.S. wealth channel is actually not the returner of capital... our U.S. wealth clients, largely through the wires, are very sticky."* Ares has ~150 institutional salespeople and 100+ people just for wealth fundraising, and a 20-year track record on "100 plus billion dollars" of direct-lending deals. Translation: the biggest, best-known managers say the redemption wave is hitting *somebody else's* funds. **4. Blue Owl's "100-to-0" loan became the case study for everything bears fear.** Jeff Snider of *Eurodollar University* devoted a whole episode ([Sept 10](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhTjkBh9wXsbTvw-2BMrTJyN-2BQ3bvAhEKdLP1nO4lejYQtGLPGfDoYmEC8q5snYWO1FAC96RG5NwSruriNew-2FjGvBmSumogo9MNBE5KYSBTUQDA-3D-3DnD0R_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXSnqDWch4EUzR8QWqY6chd8soaaPvnVsbHcnmwmwJ1Nof5sFg994Pzx6YnaUJJNGU9UHFE4pKd8V-2Fjj0ZuhOd6IrPkg4yFJa9rlr1yIQrltriou5ISxjRK5V11YVEldsU06ehLKcvym0QdR-2FEeNWBfrghG4smi06WWGc61CiTolJqJk8GWfYU-2FFfWylj1r7PI-3D)) to Blue Owl's loan to **Loparex** (a maker of adhesive backing materials, owned by PE firm Pamplona). The senior loan was "marked at par" (full value) at the end of 2025. A few months later, Moody's has declared the company in default with bankruptcy possible, and the loan "looks much more like zero." Blue Owl's public BDC, **OBDC**, moved it to non-accrual after Q2 (though OBDC's total non-accruals are still just 0.8% of the portfolio). Snider's point isn't the single loan, it's the *pattern*: private loans don't drift down 100 → 92 → 81 like traded bonds; they "remain steady until reality overwhelms the model. Then it goes from $100 to $0." He tied it to last November's Renovo Home Partners blow-up (where BlackRock held ~$150M of debt and Apollo's MidCap Financial and Oaktree were also exposed) and to fresh fraud allegations at a Point Bonita fund over "fake invoices." **5. The AI build-out is quietly becoming a private-credit story.** Two threads converged this week. Brookfield's Panossian put a number on it: the global AI build-out needs "$5.5 trillion... at the highest $7 trillion over the next five to eight years," and *"you're approaching $3 trillion of funding need from the credit markets that has been created almost overnight."* He's watching data-center loan spreads widen "in the last several weeks" (a sign lenders are either full or nervous) and warned that some deals sit in special-purpose vehicles where the hyperscaler only "guarantees a lease payment," not the whole loan. Meanwhile, *The Information* ([TITV, Sept 11](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOigpfsYoudU4oKt8IvTxYp2Yss75-2BlsCcoNBb7-2Be-2F3RyUGfO9GHUOD1cFFOYpMZTsKuX513AO-2FzKPxMPJCvYX-2FCH0RHw0jdZ7USW-2FPnI-2FEPzQ-3D-3DZpRv_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXSnqDWch4EUzR8QWqY6chd8soaaPvnVsbHcnmwmwJ1NlybKJNHAUSVfb-2BrA2DcaN3Sy4-2FQ7w0Hyg0gOgk4HIXOHMSB-2FGVeSSWDxRc7jBMkdEtZBpSCMxlHirY4TVaT-2F381an7RDmrBgjSrBQ-2FJtt5Qy-2FoWv4OfLayfrtfwxz0wI5bRPbd6lAqTnyGO9EPr1W8-3D)) reported Blackstone's Google TPU-chip venture "Crux AI" is scaling from an initial $5B to *"between $10 and $20 billion"*, and crucially, some of that money can come "from a credit fund that only requires 6%." That is private-credit capital flowing straight into AI infrastructure. ## The debate **Bear case (this week, unusually, partly voiced by operators):** The damage is structural, not noise. Recovery rates have nearly halved (60¢ → 33¢). The worst LBO vintage in memory (2021–22) is 74% of recent defaults and hasn't even hit its 2028–29 maturity wall yet. Non-traded BDCs are jammed against their 5% quarterly redemption gates, forcing them to sell whatever they *can* (not what they *should*), which leaves the remaining book more concentrated in un-sellable software loans. And the "100-to-0" markdowns (Loparex, Renovo) suggest the stated values are fiction until they suddenly aren't. Independent insurance analyst **Nick Nemeth** ([TFTC, Sept 12](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiCgrIagcq9rWR1p8uhqnYp1PtrBRc6QOr-2Fdtr7RTx3JietFreTwTCtAeHjSs8rYlx-2FWgs4Dp7w-2FsmpJuE988AA8Wh01yTUnbPPRhaNMXNgbA-3D-3DzpiF_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXSnqDWch4EUzR8QWqY6chd8soaaPvnVsbHcnmwmwJ1NohnKK6FYzWEQPYewoahQAGgZe9qs39JqiLVZGLKRTwVqWOSIOF7PaMyTy58O0xm7shijp9-2BIg6EQVUFX4zoTzUnuXw3szkfTf387qUvfYWvXNMO4SrCuXcJCytmxRRF682Ket7QZiLmm3tQtUfilCE-3D)) adds a second fuse: insurers' "allocations to private credit, commercial real estate... is a disaster," and annuity holders are surrendering policies faster than expected now that safe Treasuries yield ~5% versus the 3–3.5% they're locked into. **Bull case:** This is a normal, survivable credit cycle being amplified by a redemption *plumbing* problem in one specific vehicle type. Golub's David Golub ([Alt Goes Mainstream, Sept 10](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiIH0gEy66XkETmVxQwgVesseozWVAjVvgQrKLPB2Anw76ik-2BfczvoV2VuS8SsHKIwonJOnoKGXETQ-2FE2TnL-2BaahyX2QY-2BwL7892h6hEyMsaQ-3D-3DNEAz_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXSnqDWch4EUzR8QWqY6chd8soaaPvnVsbHcnmwmwJ1Nn9lfgiKOseBMl9LKfe6LFftGXHcXw6-2BkF5f6DT4cmsqzt65E-2FQ-2Fu72K9wZtu59SonYK3W6FkNvGow-2Fh2Vpg-2F6DJ5fEDk6yZoLHHWMNeBEF5iAM-2BO62mGq2EAQP-2BrXT0-2Bm64rkEwD8pMnN753nArsWs-3D)) put it best: *"There are two narratives... the sky is falling and there's the everything's green. Guess what? Neither is true."* Returns have come down (he pegs public-BDC average ROE falling from "high single digits" in '23/'24 to "like four and a half" in '25), but the strong managers adapt and take share in what he calls a "Darwinian moment," emerging into a more "lender-friendly" world of better spreads and terms. Ares' deVeer argues the software scare is misplaced: it's *"more of a problem for the owners of some of these assets than it is for the lenders,"* because companies bought at 20x earnings and levered only 6–7x leave "quite a lot of room for reduced valuations" before the debt is impaired. And Brookfield's own Panossian, for all his warnings, closed with: *"I don't think either of us would sit here and tell you that we're in the midst of a macro dislocation. All the major economic variables are headed in the right direction."* **Pull-quote of the week** (Golub, capturing the whole standoff): > "We're headed toward what I call a Darwinian moment... Some firms who are performing reasonably well for their investors, who have diversified sources of capital, they're going to be fine... Some firms who are not performing well and who don't have diversified sources of capital... in some cases, going to melt." The tell: bulls and bears now largely agree on the *facts* (stress is real, dispersion is widening, recoveries are lower). They disagree only on whether that's a healthy cull or the first domino. --- ## Stocks in play **Blue Owl (OWL) / OBDC**: *Bear:* the Loparex "100-to-0" is now the poster child for hidden markdowns; reputational overhang on marks. *Bull:* it's a single loan; OBDC non-accruals still just 0.8% of fair value. *Next catalyst:* next OBDC non-accrual/NAV disclosure, and whether any *second* name follows Loparex to zero. **Ares (ARES) / ARCC**: *Bull:* management says the 4th flagship direct-lending fund is drawing "tremendous" institutional interest and its wealth channel is "sticky"; scale and first-look deal flow drive positive selection. *Bear:* deVeer declined to give specific new-loan spreads; "tremendous interest" is unaudited management talk. *Next catalyst:* the fourth-fund close size, and ARCC's next non-accrual print. **Apollo (APO)**: *Bull:* Cohan ([Open Book, Sept 10](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj5MioRUVz9NJrNYf1I-2B98o-2FX1-2BUyXAbW4HhXVnd4VJ5o6tPujoCOzzfUjJh-2F7ivIy-2Bz-2BMcdWw-2F11cjCy7kVEpe-2FFtI6Q-2FVj9mA-2FwSekWgdPQ-3D-3DLU-H_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXSnqDWch4EUzR8QWqY6chd8soaaPvnVsbHcnmwmwJ1NiDpBnDwW0fRMSo5seCFU3J3UO-2FG1K5WSetdCsX1MSpvLaYuicJtD7xrzBuEk1Ow-2FQAnmnSGSOkKaF3qH84f-2Fztegp4gQNz30ofViqmmWObEmfqsxwoRI974pl1d7g5mjRRo5SYlYolvc2C8Dmw0O2A-3D)) calls Apollo the ~$1T pioneer ($850B credit / $150B PE) whose Athene insurance engine is the envy of the industry; Nemeth explicitly says Athene is run as a legitimate "firm... profit center," not a personal piggy bank. *Bear:* Apollo's MidCap Financial was among the lenders exposed to the Renovo zero; the whole insurance-funded model is what the systemic-risk crowd is circling. *Next catalyst:* any Athene surrender-rate or affiliate-paper disclosure. **Blackstone (BX)**: *Bull:* $1.3T manager positioning as the "bank roller" of AI, scaling Crux AI to $10–20B. *Bear:* routing credit-fund money (6% hurdle) into speculative AI infrastructure is exactly the risk-migration bears warn about. *Next catalyst:* B-Cred redemption data, following last week's gating headlines. **KKR**: *Bull/mixed:* building "Helix Digital Infrastructure" with NVIDIA, the Kuwait Investment Authority and Vistra, an AI-infra play from scratch. *Bear:* same AI-credit exposure question as BX. *Next catalyst:* Helix funding structure details. **BlackRock (BLK)**: mentioned as the biggest holder of Renovo's ~$150M debt that went to zero; a reminder the pain isn't confined to the pure-play credit shops. ## Read-throughs - **BDCs (ARCC, BXSL, OBDC):** The 5%-quarterly-gate mechanic is now the key watch item. Brookfield's framing (that gated BDCs are forced to sell liquid/good assets and keep the un-sellable software loans) implies *remaining* portfolio quality can quietly deteriorate even without new defaults. Watch software concentration disclosures (Brookfield says it ranges from 9–10% at some BDCs to 30/40/70% at others). - **Insurance balance-sheet partners (APO/Athene, and the broader model):** Nemeth's surrender-rate warning is the sleeper risk: if annuity holders keep cashing out to grab 5% Treasuries, the "permanent capital" that funds private credit is less permanent than advertised. Guggenheim's $20B affiliate-paper mess is idiosyncratic, but it's dragging regulatory attention onto every asset-manager-owned insurer. - **Syndicated-loan / CLO market:** Brookfield sees the 2028–29 maturity wall shutting some borrowers out of BSL and high-yield entirely, a refinancing squeeze that could push more paper into distressed hands (which is exactly where Oaktree/Brookfield want to be buyers). - **Data-center / AI borrowers:** The new frontier and the new risk. $3T of AI credit demand "created almost overnight," spreads already widening, and hyperscaler "guarantees" that may only cover a lease payment. CoreWeave's unsecured debt reportedly trading at a 12% yield (per Hedgeye's Mike Taylor, [Sept 15](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOg3UOqrPORCAOjDkVk6JbRKvFwgBMvxjW3dMWVpklSobzfTq3t6iL5o3sky373VIOS02bA08WmPG-2B7Kq2KLE4mTtKDA1DhBPPk5uxsmxSjf7w-3D-3Dw9Au_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXSnqDWch4EUzR8QWqY6chd8soaaPvnVsbHcnmwmwJ1Nm6Bydyue5n12YJ3fxTzNrzOVcg19XF-2F2p9A1-2F8Yq38HE8vXzD5B-2FGo-2FQWe-2F-2F-2Fou5Q1nINNxoSlYI65mJ5Jj32YmBvxRkBfbOAonWk5c4UlK4O9-2FvYhHXXugInbpWzVkNTFQVZHYVJFkbw9OhGl714Y-3D)) is an early stress signal. --- ## What changed vs last week Last week (Sept 2–9) was a pundit-driven bear cluster: Blackstone B-Cred capping redemptions at 5% for a second quarter, non-traded BDC fundraising down ~82%, and CCC junk spreads at multi-year highs, with one lone operator-ish rebuttal from data-provider John Cole Scott (non-accruals actually *down* to 1.64%). **This week the source quality jumped a full tier.** For the first time in weeks we heard from three genuine *lenders* (Brookfield, Ares, Golub), not commentators. That matters because: - **The bears got a powerful new witness: the operators themselves.** Brookfield's 60¢→33¢ recovery-rate stat and its "we do think there are a few problems" are far more damaging coming from a lender than from a short-seller. The redemption story also gained a mechanical explanation (the 5% gate) rather than just a scary fundraising percentage. - **The Loparex thread hardened.** Last week it was a one-line "first named markdown." This week Snider laid out the full 100-to-0 timeline (par at end-2025 → default now), tied it to the Renovo precedent (Apollo MidCap, Oaktree, BlackRock) and fresh Point Bonita fraud claims, and turned it into a general critique of how private marks work. - **Two themes went from footnote to headline:** (1) *AI/data-center financing as a credit story*: Brookfield's $3T number, spread-widening warning, and Blackstone's $10–20B Crux AI raise from credit funds; (2) *insurance contagion*: Nemeth's Guggenheim/surrender-rate deep-dive, versus last week's passing "permanent capital" mention. - **What's consistent:** the core bull/bear split (a liquidity/redemption event vs. a credit event) is unchanged, but this week both sides are arguing from the *same* set of conceded facts, which is new. - **What faded:** last week's "late 2006" bear framing (Larry McDonald) wasn't repeated, and was arguably countered by Brookfield's "not a macro dislocation." --- ## 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. 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