Don't just focus on Iran, the private credit crisis in the United States is gradually reappearing as the "subprime mortgage crisis."

When the market's attention is focused on geopolitical risks, a quietly spreading private credit crisis is accelerating within the U.S. financial system. Redemption waves, asset sales, fund closures - this script, investors saw in 2008. This week, the world's largest asset management company BlackRock announced restrictions on investor redemptions for its $26 billion HPS Corporate Lending Fund (HLEND), becoming the most impactful signal to date. Previously, Blackstone's private credit fund faced a record 7.9% redemption request, and Blue Owl's stock price fell below its SPAC listing price. The three private credit giants consecutively sounded the alarm, and the gears of a vicious cycle have already been set in motion. At the same time, The Pacific Investment Management Company (PIMCO) warned in its latest client report: the direct lending industry is about to enter a "comprehensive default cycle," and stress testing is inevitable. This judgment comes from a long-term critic of private credit, and its weight cannot be ignored. The spread of the private credit crisis is directly reflected in the stock price movements of related listed companies. Blue Owl's stock price fell below the SPAC listing price, and the valuations of institutions like Blackstone and BlackRock's private credit-related businesses are under pressure, the entire industry is facing a systemic reevaluation of investor confidence. Fund Closures: BlackRock "Limits Redemption" for Private Credit Fund According to an article by Wall Street News, BlackRock announced on Friday that shareholders of its HPS Corporate Lending Fund, HLEND, had applied to redeem 9.3% of shares, but the fund's management decided to set the buyback limit at 5%, equivalent to around $1.2 billion. In its statement, BlackRock classified this move as a "foundational" arrangement for liquidity management, stating that without restrictions, there would be a "structural mismatch" between investor capital and the duration of private credit loans. This wording sounds calm, but the market understands the implications: if full redemptions were allowed, BlackRock would have to initiate large-scale asset sales. Prior to this, another private credit department under BlackRock had shown alarming signs - BlackRock TCP Capital Corp. in its fourth-quarter report, wrote down the valuation of a $25 million loan to Infinite Commerce Holdings from 100 cents on the dollar to zero, just three months before it was marked at face value. From 100 to 0 in three months, with no warning. Chain Reaction: Vicious Cycle Triggered by Asset Sales BlackRock's fund closure is not an isolated event, but the end - or perhaps the beginning - of a fuse 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 highly concentrated exposure to software loans, whose value was rapidly depreciating due to AI disruption, Blue Owl announced the sale of $1.4 billion in private credit loans, effectively freezing investor funds instead of restoring quarterly redemption mechanisms. The company emphasized that the assets to be sold were of the highest internal risk rating (level 1 or 2 in a 5-level system). However, this "sell high-quality assets first" strategy is actually an accelerator of the crisis. If the secondary market only exists for high-quality assets, the liquidity for the sale of portfolios of other Business Development Companies (BDCs) will become even scarcer. It is reported that NMFC has stated that it is progressing with the sale of a portfolio of around $500 million in investments (17% of its total investments as of the end of the third quarter of 2025). Blackstone's situation is also severe. Its private credit fund BCRED has a management scale of $82 billion, with redemption requests reaching a record 7.9% this quarter, exceeding the statutory limit of 7%. To avoid triggering closure mechanisms, Blackstone employees were asked to personally subscribe $150 million to fill the gap. Three institutions, three approaches, but the logic is the same: closure or quasi-closure to avoid forced asset sales triggering a larger valuation collapse. Analysis points out that the problem lies in the fact that BlackRock's decision to close the fund has already sent the market the strongest signal of panic and could trigger more investors rushing to redeem. Blue Owl: Stock price falls below listing price, continued exposure to risk As the "epicenter" of this crisis, Blue Owl Capital's situation continues to worsen. Its stock price fell below the $10 SPAC listing price this week, hitting a three-year low. According to Bloomberg, Blue Owl holds a 36 million ($48 million) exposure to London property loan firm Century Capital Partners Ltd. - a risk exposure formed indirectly through its acquisition of Atalaya Capital Management until 2024. Century filed for bankruptcy last month with total liabilities of approximately 95 million, with NatWest Group and Hampshire Trust Bank as its priority creditors. Blue Owl holds the riskiest subordinate shares in Century's loan portfolio. Century's manager, RSM UK, expects to fully recover the senior loans, but the fate of the subordinate shares remains to be seen. This event reveals another side of the expansionary period of private credit: asset-backed financing had been viewed by industry leaders as a growth frontier, with executives from Pimco, Carlyle Group, Marathon, and Blackstone publicly optimistic about this track. Now, the risks of this track are surfacing in unexpected ways. PIMCO Warning: Comprehensive Default Cycle is on its Way As whispers of panic grow in the private credit market, PIMCO analysts Lotfi Karoui and Gabriel Cazaubieilh issued the most direct warning yet in their latest client report. The two analysts wrote in the report: "Like every mature sub-segment of the leveraged finance market, direct lending will eventually face a comprehensive default cycle - a cycle that will simultaneously test its resilience to industry-specific shocks and macroeconomic shocks." PIMCO has been one of the early critics of private credit. As fundraising for direct lending strategies soared, this $2.3 trillion asset management institution chose to take a contrarian approach, actively seeking out potential issues in the private credit sector that supports companies. PIMCO's analysis points out several key risks: Firstly, the record fundraising scale after the 2008 financial crisis has led to continuously loosening underwriting standards; Secondly, the highly concentrated exposure of direct lending portfolios to the software industry will drag down relative performance under AI shock; Thirdly, direct lending funds have not been providing sufficient risk premium compensation to lock in investors' liquidity. Regarding the liquidity dilemma faced by BDC investors, PIMCO's language is equally direct: "Semi-liquidity does not equal full liquidity. Investors must assess their own liquidity needs and their tolerance for restricted funds." However, PIMCO also distinguishes between different tracks within private credit, believing that sub-segments such as asset-backed financing still have investment value and can provide "investment-grade" risk levels. Last year, PIMCO raised over $7 billion for its asset-backed financing strategy. Subprime Crisis Redux? The structural logic of this crisis is not complex: semi-liquid products promise quarterly redemptions, but the underlying assets are private loans with longer durations; when redemption requests exceed a threshold, the manager either closes or sells assets; asset sales depress asset prices, triggering more valuation adjustments, and thus causing more redemptions - a cycle is formed. This logic played out in the subprime mortgage market in 2008. At that time, the initial cracks also appeared in a market corner considered "sufficiently diversified and specialized." Today, the private credit market has reached a size of $1.8 trillion, and its concentration of risk, opacity of valuations, and liquidity mismatch are being tested in a similar way. This article is derived from Wall Street News, GMTEight Editor: Lifu.