Private‑credit market stress
U.S. private credit is under strain: borrower defaults, liquidity gaps, and distressed exchanges are rising after a decade‑long boom, forcing fund structure innovation and bank re‑entry into leveraged lending. Markets expect continued retail outflows and tougher due diligence, making distressed‑scenario modeling a core interview focus for IB/PE candidates. (pitchbook.com)
Morningstar DBRS found distressed exchanges accounted for 94% of private‑credit downgrades to D or SD in the 12 months through Feb. 28, 2026, with 17 rating downgrades recorded in that period. (pitchbook.com) Ares capped withdrawals from its $10.7bn Ares Strategic Income Fund at 5% after investors sought to redeem 11.6% of the vehicle, and Apollo imposed similar caps across its private‑credit BDCs. (bloomberg.com) Blue Owl halted quarterly redemptions for its retail‑targeted vehicle OBDC II and announced a 30% NAV return to investors as it shifts the fund toward liquidation. (bloomberg.com) Morgan Stanley strategists warned default rates in direct lending could rise to about 8% in a baseline stress scenario, citing heavy software exposure (roughly 26% of BDC portfolios) and a front‑loaded maturity wall with 11% of software loans due in 2027 and 20% in 2028. (bloomberg.com) U.S. regulators (OCC and FDIC) rescinded formal leveraged‑lending guidance on Dec. 5, 2025, a policy change that market analysts say lowers barriers for banks to compete again in leveraged lending. (mayerbrown.com) Industry estimates put global private‑credit assets around the US$3tn mark as managers expand semi‑liquid and evergreen structures, while some wealth‑channel evergreen funds grew ~139% between 2022 and end‑2025 to nearly $400bn. (aima.org) Specialist interview prep providers and restructuring coaches report increased demand for distressed‑situation and restructuring modeling modules in 2026, with platforms adding dedicated restructuring interview guides and practice cases for IB/PE candidates. (ibvine.io)
