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

As market attention focuses on geopolitical risks, a quietly spreading private credit crisis is accelerating within the U.S. financial system. Redeployment 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 fund experienced a record 7.9% redemption request, and Blue Owl’s stock price fell below its SPAC listing price. Three private credit giants are facing urgent issues, and a vicious cycle is taking hold.

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.

Fund Closures: BlackRock Restricts Redemptions for Its Private Credit Funds

According to Wallstreetcn, BlackRock issued a statement on Friday saying that shareholders of its HPS Corporate Lending Fund (HLEND) had 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 wording sounds calm, but the market understands the implications: if full redemptions are honored, BlackRock would have to initiate a large-scale asset sell-off.

Earlier, another BlackRock private credit division had 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.

A Chain Reaction: The Vicious Cycle of Selling

BlackRock’s closure isn’t an isolated event but the end—or perhaps the beginning—of a trigger that has already been lit.

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-driven impacts—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 accelerating the crisis. If secondary market buyers only want high-quality assets, the portfolios of other business development companies (BDCs) will face even thinner liquidity. It is 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 to $150 million to fill the gap.

Three institutions, three responses, but the logic is the same: closure or de facto closure to prevent forced sales that could cause further valuation collapses. Analysts note that BlackRock’s decision to close itself signals the strongest panic warning to the market, potentially triggering more investor redemptions.

Blue Owl: Stock Price Falls Below IPO Price, Ongoing Risk Exposure

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

According to Bloomberg, citing sources, Blue Owl has an exposure of £36 million (about $48 million) to Century Capital Partners Ltd., a London-based real estate lender—risks indirectly formed through its acquisition of Atalaya Capital Management in 2024.

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

Blue Owl holds the riskiest subordinate tranches of Century’s loan portfolio. The 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 (ABF), once seen as a growth frontier by industry leaders like Pimco, Carlyle, Marathon, and Blackstone, now faces risks surfacing in unexpected ways.

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 both 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 chose to take a contrarian stance, actively seeking potential issues within private credit-supported companies.

Their analysis highlights several core risks:

• Record-breaking fundraising post-2008 has led to continued loosening of underwriting standards;

• The high concentration of software industry exposure in direct lending portfolios will drag performance under AI shocks;

• Long-term, direct lending funds have failed to provide sufficient risk premiums to lock in liquidity for investors.

Regarding liquidity challenges faced by BDC investors, PIMCO’s language is equally 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 value, providing “investment-grade” risk levels. Last year, PIMCO raised over $7 billion for its asset-backed financing strategies.

Revisiting the Subprime Crisis?

The structural logic behind this cycle isn’t complicated: semi-liquid products promise quarterly redemptions, but the 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, leading to more redemptions—a vicious cycle.

This pattern played out during the 2008 subprime mortgage crisis. The initial cracks appeared in a corner of the market once considered “diversified and professional.” Today, the private credit market, with a size of $1.8 trillion, faces similar tests—its risk concentration, opaque valuations, and liquidity mismatches are being scrutinized in the same way.

Risk Disclaimer and Terms of Liability

Market risks exist; investments should be made cautiously. This article does not constitute personal investment advice and does not consider individual user objectives, financial situations, or needs. Users should evaluate whether any opinions, views, or conclusions herein are suitable for their specific circumstances. Investment decisions are at their own risk.