Hua Er Jie Jian Wen·2025-12-22 00:24Core Insights - The U.S. private credit market, once seen as a safe haven for individual investors, is facing a dual shock of deteriorating fundamentals and collapsing confidence, leading to asset revaluation and the bursting of a bubble in the industry [1][2] - Blue Owl Capital's withdrawal from financing Oracle's $10 billion AI data center project highlights a fundamental shift in the credit market's attitude towards aggressive capital expenditures by tech giants, resulting in pressure on Oracle's stock and the broader tech sector [1][3] Group 1: Market Dynamics - The private credit industry, valued at over $2 trillion, is under significant stress as rising default rates and high-interest environments put pressure on borrowers, leading to stock price declines and increased bad debts for major asset management firms like KKR and BlackRock [1][4] - The Business Development Companies (BDCs) that cater to individual investors are experiencing severe stock price drops, with some down by double digits despite the S&P 500 rising approximately 16% this year [4][6] Group 2: Financial Health of BDCs - FS KKR Capital's stock has fallen about 33% this year, with its non-performing loan rate increasing from 3.5% in January to approximately 5% by September, indicating deteriorating credit quality [6] - BlackRock's BDC reported that 7% of its loans were in default, highlighting the growing concerns over credit quality within the sector [6] Group 3: Liquidity and Valuation Issues - Blue Owl's attempt to merge its private BDC with publicly traded BDCs failed due to significant valuation discrepancies, with public BDCs trading below their net asset value (NAV) [7] - The lack of liquidity in private assets during market downturns complicates pricing, leading to panic-driven redemptions from investors attracted by high dividends, thus increasing uncertainty regarding principal safety [7]