Another Real Crisis Hiding Behind Record Highs

Did you already read about how subprime auto is imploding behind the scenes of the market, while “investors” chase gamma squeezes higher in an ongoing distortion feedback loop that is making things look far better than they are under the surface?

Good. Now let me offer up a reminder of another sector of the market that’s also still imploding behind the surface.

Moments ago, it was reported that yet another private credit firm has effectively frozen up under a wave of redemption requests (stop me if you’ve heard this one before), triggering an abrupt liquidity crunch that will likely do damage to what little credibility parts of this space still had with investors. At this point, private credit and subprime auto are starting to look like a two-headed monster.

KKR’s largest private-credit fund for individual investors reported a $560 million first-quarter loss after more loans defaulted, according to the Wall Street Journal this week.

The write-down erased roughly 10% of the fund’s net asset value, making it one of the clearest signs yet of stress in a major private-credit portfolio. Loan defaults rose sharply to 8.1%, up from 5.5% in December.

The $12.3 billion business-development company, FS KKR Capital Corp., has faced mounting pressure since last year after revealing that...(READ THIS FULL COLUMN HERE).

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