A Perfect Storm: Wall Street Launches Private Credit CDS Ahead Of The Next Crisis, And Now The Fed And Treasury Are Getting Involved

There was something strange about the brutal meltdown of the private credit sector.

Ever since the big drawdown following the Liberation Day meltdown, the bad news just kept coming in waves, at first, it was the collapse of First Brands and Tricolor last summer, which sparked a frenzied search for more "cockroaches" (in Jamie Dimon's words) that sparked a painful slide in the stock prices of publicly traded BDCs; then in early 2026, the markets attention shifted to the core composition of loans that make up the bulk of private credit portfolios. It was then that the market made the realization, documented here first, that loans by software companies - now painfully disrupted almost daily by various AI agents - make up the majority of private credit fund holdings, which in turn set off the second, and more powerful, plunge in BDC and interval fund stock prices. The result is that virtually every name in the sector is now trading deep in the red for 2026, and worse, is down since the start of 2025.