Following the Private Credit Loan Books | Laks Ganapathi

BlackRock

• Laks Ganapathi · Unicus ResearchBearish

  BlackRock's HPS private credit fund gated redemptions, returning about half of $1.2B requested.

  She cites the HPS corporate lending fund, which has a $2,500 minimum tranche aimed at retail. On March 7 it gated redemptions for the first time in its four-year history. Investors submitted about $1.2 billion in redemption requests and BlackRock returned roughly $600 million. She uses this as evidence that retail investors in these vehicles cannot get their money out when stress arrives, and that the retail channel is where the damage lands.

  “On March 7, [the HPS fund] gated for the first time in their four year history. Investors submitted 1,200,000,000 in redemption request. BlackRock returned roughly 600,000,000.”at 8:01

• Laks Ganapathi · Unicus ResearchBearish

  BlackRock's private credit funds may be worse than Blue Owl, and insurer stakes are a risk.

  Laks names Blackstone and BlackRock together as the largest funds in the world, able to do what they want. They own private credit funds, and those funds also own stakes in insurers that the funds are diversifying into. Her team's work leads her to think these managers may be worse than Blue Owl, which she sees as the weaker link. She hedges with 'might'.

  “[Blackstone and BlackRock] ... they might be a lot worse than [Blue Owl].”at 42:42

Blue Owl Capital

Across the shows: 1 speaker in other episodes, past 30 days

• Laks Ganapathi · Unicus ResearchBearish

  Blue Owl's OBDC markdowns concentrate in education, consumer and healthcare, not software.

  Her team's loan-book work on OBDC as of March 31 found that software was not the main source of markdowns. Healthcare providers and services, consumer goods, HR support services, joint ventures, education and household products made up most of the top exposures. Internet software and services ranked only tenth in net unrealized depreciation. Education was marked down by about 52% of cost and consumer products by about 20%, while software was not even in the top nine. She argues that most private credit funds have losses across the board and that the 'AI disrupting software' story does not match the book. She adds that Blue Owl is the weaker link in the sector, and that other managers are probably doing worse, though she offers no data for them.

  “But majority of the book and the loans that they have taken in OBDC are not even software or not even AI.”at 36:43

• Laks Ganapathi · Unicus ResearchBearish

  OBDC's biggest markdowns sit in healthcare, education and consumer, so its software exposure may be mislabelled.

  Laks is reviewing OBDC's loan book. The top markdowns are not in software-tagged sectors, but in healthcare, education and consumer borrowers. She suspects healthcare or education borrowers may actually be software businesses that are classified differently. Her team is hiring engineers to check these companies line by line, to see whether they are really healthcare or healthcare software. She says the default figures reported may therefore understate the real problem.

  “I'm looking at the loan book for OBDC, and I'm like, since top nine is not software... are they identifying the health care sector in some way as software?”at 38:10

777 Partners

• Laks Ganapathi · Unicus ResearchBearish

  777 Partners double-pledged collateral, with over $350M pledged that it did not own or had already pledged elsewhere.

  She describes 777 Partners, a Miami firm that bought future payment streams from litigation and legal-settlement claimants. Her account: its lender Leadenhall was tipped in 2022 that the assets backing its loan did not exist. In March 2023 a second lender, Credit G, was shown a list in which more than 1,600 identical assets worth about $185 million appeared on both lenders' lists, so they were double-pledged. Leadenhall's federal lawsuit alleges 777 pledged more than $350 million of collateral it did not own or had already pledged elsewhere. She draws the parallel with First Brands. The episode then spread into insurers, including Atlantic Coastal Life, through the reinsurance chain.

  “the lawsuit said that seven seventy seven pledged more than 350,000,000 of collateral. It did not own or had already pledged elsewhere.”at 22:34

Atlantic Coastal Life Insurance Company

• Laks Ganapathi · Unicus ResearchBearish

  Atlantic Coastal Life faces receivership; $2.5B expected surrenders vs $75M of assets.

  She describes Atlantic Coastal Life as an insurer whose policyholders are mostly over 70 and whose state regulator has moved to receivership. She links it to the 777 Partners double-pledged collateral story: Bermuda cancelled a reinsurer license tied to 777 for non-payment, Utah and South Carolina restricted new business, and the state now seeks receivership. She contrasts an expected surrender wave of about $2.5 billion within three years with only $75 million of company assets. Retirees will eventually be paid, but only after long delays. She presents this as one example of a broader pattern across many insurers.

  “All of the retirees were more than 70 years old. There is a surrender [event] coming in three years, and it's expected to be at the sum of $2,500,000,000 and Atlantic Coastal Life only has $75,000,000.”at 24:59

Apollo Global Management

Across the shows: 3 speakers in other episodes, 3 bullish and 0 bearish calls, past 30 days

• Laks Ganapathi · Unicus ResearchBearish

  Apollo and its Athene insurer have problems, linked to a wider insurer-private credit network.

  She says Apollo, Athene, BlackRock and Blackstone all have problems, and that her team is working on one insurance company that connects to many others, like a spreading cancer. Her team has traced Athene to MetLife, where commercial mortgage and real estate exposures sit, and she estimates that roughly 20 to 30% of insurance investments are exposed to private credit. She says these managers are secretive and that few numbers leak out, so the systemic picture depends on forensic work across Bermuda and Cayman entities. Her view on Apollo is one of several she applies to the large managers, and the evidence in this passage is general rather than specific.

  “yes, Apollo, Athene, BlackRock, Blackstone, they all have problems.”at 29:56

Blackstone

Across the shows: 3 speakers in other episodes, 2 bullish and 1 bearish calls, past 30 days

• Laks Ganapathi · Unicus ResearchBearish

  Blackstone's private credit funds may be worse than Blue Owl, and insurer stakes are a risk.

  Laks says Blackstone and BlackRock are among the largest funds in the world. They own private credit funds, and those funds hold stakes in insurance companies they are diversifying into. Based on her team's work, she is inclined to think they may be worse than Blue Owl, which she calls the weaker link. She suggests Blue Owl may be made an example of while the bigger managers clean up their own books. She hedges with 'might'.

  “I would be inclined based on the work that we have done to say that they might be a lot worse than [Blue Owl].”at 42:42

Ally Financial

• Laks Ganapathi · Unicus ResearchBearish

  Ally shouldn't trade at its level; it's extending auto loans instead of repossessing cars.

  Laks cites repo sources who say Ally does not want to repossess. Used-car values are below loan balances because manufacturers raised prices, so cars are upside down. Repo sources were told not to throw good money after bad. Ally is therefore extending loans rather than taking losses. Laks concludes that Ally should not trade where it is trading now.

  “Ally bank should not be trading at what it is trading right now, and they are doing extend and pretend.”at 52:05

AutoZone

• Laks Ganapathi · Unicus ResearchBearish

  AutoZone is a short, as consumers trade down and stretch to afford car repairs.

  Laks says her team has recommended AutoZone as a short from above $4,000. Her supporting case is that consumers are trading down, with subprime buyers shopping at dollar stores and even higher earners shifting to cheaper options. She gives an anecdote about avoiding an expensive dealership repair in favour of a cheaper independent quote. The transcript garbles her point about the do-it-yourself business, so the causal link to AutoZone's results is only partly stated.

  “we have been recommending AutoZone as a short from the north of 4,000.”at 54:38

Airbnb

Across the shows: 4 speakers in other episodes, 35 bullish and 4 bearish calls, past 30 days

• Laks Ganapathi · Unicus ResearchBearish

  Airbnb's fundamentals are weak: a major European regulatory problem, with results propped up by BNPL.

  Laks lists Airbnb as a short-side idea. She says it faces a huge regulatory problem in Europe and across the world. She argues that the reason it is doing well is BNPL, which means its results depend on consumers financing bookings with debt that is under strain.

  “Airbnb fundamentals are... They have a huge regulation problem in Europe and across the world. And the reason they are doing well is because BNPL.”at 1:02:35

Private credit

• Laks Ganapathi · Unicus Research

  Sources say underwriting due diligence isn't happening at some well-known private credit funds.

  Her team has heard from sources, who asked not to be named, that underwriting due diligence is not happening at some well-known private credit funds. She uses this to argue that the institutional model works only if underwriting is real, and that retail products sold through wealth channels lack the oversight institutions rely on. She presents it as a warning rather than a verified finding, which lowers confidence in the claim itself.

  “The underwriting due diligence for some of the private credit funds that are well known are not happening, and that should scare everybody.”at 4:48

• Laks Ganapathi · Unicus Research

  Reported private credit default rates understate true distress because PIK conversions and extend-and-pretend mask losses.

  She cites Fitch's record 6.3% trailing-twelve-month private credit default rate, and earlier a 9.2% figure for 2025, but says she does not trust those numbers and thinks the true rate is higher. She explains that when borrowers move from cash interest to payment-in-kind (PIK), the loan is restructured and kept current, which resembles the extend-and-pretend seen in auto dealerships and consumer credit. She says she suspects Fitch may treat that conversion as default, and that the conversion is what she is questioning. Her team marks loan books by comparing tranche values across roughly 150 funds, and so far almost everything appears to be at or near par, which she considers suspicious. The reasoning is hedged, since she is still working through the data.

  “So the default rate, I believe what Fitch is doing is when a payment moves from cash to PIK. So I have a feeling that that conversion that they are considering as default.”at 15:17

• Laks Ganapathi · Unicus Research

  Private credit funds own reinsurers, linking retiree-held insurers to private credit in a systemic, incestuous network.

  She describes a chain: private credit funds bundle loan tranches and sell them to insurers, which pass risk to affiliated reinsurers. Many funds own their own reinsurers, so the risk is hard to locate. She cites S&P data showing about 34% of roughly $1.29 trillion in cash and invested assets were placed across 122 Bermuda insurers. She also cites nearly 14% of general account assets in private placements in 2024, close to $1 trillion and up from 10% in 2014. She says roughly 20 to 30% of insurance investments are exposed to private credit, and that this connects to MetLife through commercial mortgages. Because the Bermuda and Cayman data is not public, she has hired a forensic investigator. She concludes the problem is systemic and that the largest managers are involved.

  “Private credit funds also own their own reinsurance companies. This is as incestuous as you can get.”at 18:49

• Laks Ganapathi · Unicus Research

  Private credit loan books are nested through holdcos and midcos, hiding true exposure to AI and other sectors.

  Laks says tracing private credit exposure is hard. Many loans sit under holdco and midco structures owned by two or three private equity firms. Her team has to check those owners' past investments, such as whether they are software, retail or consumer. Funding then runs further down the chain. In some cases it takes five or ten steps to find who is actually exposed, and at the end of the chain are names like xAI and NVIDIA.

  “And the worst case is they also have holdco, midco... some cases, five or 10 steps to see who is actually exposed.”at 39:25

• Laks Ganapathi · Unicus Research

  Private credit funds are not marking loans down to real value, so reported NAVs look unrealistic.

  Laks says private BDCs are not marking their loans down because they are private and managers do not want to. She points to the Medallia case: Thoma Bravo handed the company to its lenders and wrote off about $5.1bn of equity, then Blackstone, Apollo and KKR injected a further $150m. Yet the loan books are still marked at or above par. She says this does not make sense and asks for the facts behind the NAVs. She also says public BDC marks are not reflecting real values either, and that marking down would trigger investor questions.

  “but in private BDCs for definitely, they are not marking it down because it's private, and they don't want to...”at 44:19

• Laks Ganapathi · Unicus Research

  AI sell-off may spill into private credit; quiet from PE and private credit news is worrying.

  Laks is watching whether the AI sell-off spreads into private credit. A large number of private equity firms need refinancing at the end of this year and into next year. The news flow from private equity and private credit has been very quiet into late 2026, which she finds worrying because the stress may not yet be showing up in reported figures.

  “I am waiting to see how the AI sell off is going to echo into the private credit... It's been very quiet, so that scares me.”at 45:15

• Laks Ganapathi · Unicus Research

  Many private credit 'first lien' loans may not be first, and their collateral may be double-pledged.

  Laks asks how many first-lien loans in private credit are actually first. Jack adds that some lenders co-own first-lien loans but take losses first, so the seniority is weaker than the label suggests. Laks asks whether a recovery would have any collateral behind it and how anyone knows the collateral is not double-pledged. She says it is strange that markets sit at or above par after a sector-wide wave of distress.

  “when you talk about first lien, it reminds me of the question that I keep asking my team, and is that how many first liens are actually first?”at 47:24

US consumer

• Laks Ganapathi · Unicus Research

  Consumers leaning on BNPL, personal loans and credit cards, the same people now buying private credit.

  She says BNPL use is high, personal loans from banks have skyrocketed and credit card debt is widespread. The people carrying this debt are likely the same retail investors who put $2,500 into private credit funds. She uses this to argue that retail private credit exposure is dangerous because household balance sheets are already stretched, so those investors have less cushion when redemptions are gated. The evidence is anecdotal and aggregate, and she does not cite specific figures in this passage.

  “Jack, you have to understand people are using BNPL. Personal loan taken out of the banks have skyrocketed. People have credit card debt. The chances are the same crowd is putting their $2,500 in these private credit funds.”at 9:22

• Laks Ganapathi · Unicus Research

  Auto lenders are hiding losses via extended loans and volume growth, so car-loan credit is deteriorating.

  Laks describes 90-plus-month car loans on cars people cannot afford, and negative equity across the auto market. Repo sources say lenders avoid repossessions because taking cars onto their books forces charge-offs. She says banks respond by increasing originations, which dilutes the default rate, and by loosening scoring with VantageScore instead of FICO. This lets banks cut loan-loss provisions and keep earnings up for now. She sees this as unsustainable, with the timing depending on how long banks can keep it going.

  “Extend and pretend. You have ninety plus months car loan.”at 51:33

• Laks Ganapathi · Unicus Research

  BNPL is propping up consumer credit, and private credit buys those loans and repackages them.

  Laks says BNPL is why some consumer names and restaurants are still doing well, so it is holding consumer credit together. The loans from BNPL providers such as Affirm and Klarna are bought by private credit. That capital is then bundled through significant risk transfers and sold into asset-backed securities or to banks. She describes this as a circular financing loop, similar to the AI trade, that spreads risk to new buyers.

  “the consumer credit is being held by the BNPL... who buys the BNPL loans from Affirm and Klarna and everything? Private credit.”at 1:02:55

Private markets for individual investors

• Laks Ganapathi · Unicus Research

  Wealth managers sold private credit to retail with $2,500 minimums; retail becomes exit liquidity when funds gate.

  Her team's sources say wealth managers sold private credit funds to retail clients with a $2,500 entry minimum, pitching high returns while not reviewing prospectuses and reportedly receiving kickbacks. She argues this is a structural problem: institutions can absorb losses from illiquid long-duration loans, but when fear hits, retail investors are first out the gate, so retail money becomes exit liquidity. She also questions whether inflows into private credit funds are organically invested or used to meet redemptions (a Minsky-style Ponzi dynamic), saying she needs line-by-line NAV and return data to believe otherwise. Retail investors are also using BNPL and credit cards, so she thinks the same people are being pulled into these funds. She expects more redemption caps but believes private credit as an asset class will survive; the damage is concentrated in retail.

  “Guess what? They were not. We were told that the wealth managers were getting kickbacks. We were told that no one reads the prospectus, and that all they told their clients was you will make a lot of money in it.”at 7:31

Private equity

• Laks Ganapathi · Unicus Research

  Most private equity-backed companies are zombies; nobody knows which are viable.

  She argues that most of the private equity-backed companies that private credit funds lend to are zombies: they are deep in the red or should not be in business. The problem is that nobody can tell which companies are viable and which are not. Combined with her view that new inflows may be used to meet redemptions, this suggests the lending base is weaker than headline figures imply. The claim is stated strongly, but she gives no specific company-level data in this passage.

  “We think most of the private equity firms are zombie companies as in... They are in deep red or they should not be in business, and nobody knows which is which.”at 11:22

Software & SaaS

• Laks Ganapathi · Unicus Research

  AI-disruption-of-software narrative is real but a convenient excuse for private credit redemptions.

  Blue Owl attributed redemption requests to AI disrupting software. She says the AI-disruption narrative is real and has problems, but argues that most private credit funds use it as an excuse. Her loan-book analysis of OBDC shows most losses come from healthcare, education, consumer and other sectors, with software ranking far lower. She sees the redemption story as a cover for broader credit deterioration across the portfolio.

  “I'm saying AI disrupting the software narrative is real, and it has issues. But I think most private credit funds are using AI as an excuse.”at 36:57

Commercial real estate

• Laks Ganapathi · Unicus Research

  A large commercial real estate refinancing wave is coming, and banks can only extend loans so long.

  Laks says commercial real estate is in extend-and-pretend, with another round of extensions layered on the last. Higher-for-longer rates mean refinancing will be much more expensive. A large wave of CRE and private equity loans is coming due. She says how long lenders can keep extending depends on how long the banks allow it.

  “So you can keep doing that, but you have a higher for longer interest rate. And there is a huge wave of commercial real estate coming for refinancing,”at 50:50

US rates & the Fed

• Laks Ganapathi · Unicus Research

  The Fed will raise rates in December, after avoiding a hike before the midterms.

  Laks believes the Fed avoided a hike before the midterms and will be forced to raise rates in December. Her reasoning is that extend-and-pretend in commercial real estate, private equity and consumer lending cannot continue under higher-for-longer rates. Banks can only keep deferring losses for so long.

  “Somebody clearly didn't have the guts to increase the rate right into the midterms, so they are going to increase the rate in December. They have to.”at 51:04

AI infrastructure & data centers

• Laks Ganapathi · Unicus Research

  Data center debt will crack before direct lending, triggered by a macro shock and political pressure.

  Laks ranks the risks. Data center debt is first, because it would be triggered by macro stress such as the sell-off after Democrats swept Congress, which she says makes data centers a political target and leads her to expect big write-offs. Private credit deteriorates more slowly, since it depends on investors requesting redemptions before the damage shows. Her team has not yet found a data-center-specific loan book, but she believes the debt sits in private credit funds.

  “The priority wise, data center first and then the direct lending... But data center debt would be the first one triggered by the macro.”at 1:00:36

Consumer & retail

• Laks Ganapathi · Unicus Research

  Consumer retail will weaken into early 2027 as BNPL props up spending that subprime buyers cannot afford.

  Laks expects consumer retail to be a little stronger for now, then to deteriorate well into early 2027. Her reason is that buy-now-pay-later is holding the economy together. Subprime consumers are trading down to dollar stores, and even high earners are rotating to cheaper options. Consumers are rotating and cannot afford it, so the spending that BNPL supports is fragile.

  “Consumer retail could be a little stronger, and it will deteriorate well into 2027 beginning. That's because... the BNPL is pretty much holding the economy together.”at 1:02:20