Private Credit Is LYING…The “FAKE VALUATION” Crisis Banks Are HIDING

Private credit is sitting on a ticking time bomb — and most investors don’t even realize it.

Public SaaS stocks are down 30%… but private credit funds are still marking those same types of loans near full value. That gap? That’s where the risk is hiding.

In this video, we break down:
Why private credit valuations are lagging reality
The software concentration risk nobody wants to talk about
Why JPMorgan quietly marking down collateral changes everything
The $12.7 billion maturity wall coming in 2026
How AI is destroying the SaaS assumptions these loans were built on
This isn’t a risk — it’s a process that has already started.

If you’re exposed to BDCs, private credit funds, or income ETFs… you need to understand what’s coming next.

📉 The repricing hasn’t hit yet — but it will.

Transcript

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Public SaaS stocks are down 30% since last October, 30%. And the private credit funds that lent billions to those same companies are still carrying those loans at near full value on their books. That gap between what the market says these companies are worth and what the funds are pretending that they're worth is where your money's sitting right now. And the clock on closing that gap just started. Yesterday we talked about the shadow default rate. The official number is 2%, and the real number, the real number, when you count the bad pick loans, is more like 6.4%. Today I'm going to show you where the real damage is concentrated because the gates going up at Apollo and Aries and Blue Al are not random. They're clustered around one specific problem that the private credit industry has been hoping nobody would notice. And of course, that is software. Here's what the consensus story is AI is disrupting SaaS companies. Some private credit funds have high exposure to software borrowers. The sector has some stress. Analysts are watching it very closely. The managers say that they're comfortable with their positions and their underwriting was disciplined. That is the surface. And here's the problem with that story. It assumes that the marks are accurate, but unfortunately they're not. If you like this type of content, please click like and consider subscribing. This is exactly the kind of thing that the mainstream financial media is not telling you right now. Here's the mechanism that nobody's explaining in the public markets. When a stock drops 30%, that's the mark. It happens in real time. Every investor holding that stock sees it immediately, immediately, milliseconds in private credit. The fund manager marks the value of their own loans themselves quarterly, using their own models with their own assumptions about what those borrowing companies are worth. There's no market price telling them the answer. They decide. And when those managers have fees tied to net asset value, hmm, you should be thinking about this. And investor redemption rights triggered by NAV declines, there is an enormous incentive to mark them really slowly. So when SaaS stocks collapse 30% between October 2025 and February 26, the private credit NAV on those loans, the same types of companies, did not move in lockstep. The public market repriced. The private markets have not quite caught up. That catching down process, when it happens, is the real event. And it's starting. Here are the specific numbers that you need to know right now. Software and technology companies represent roughly 25% of the entire private credit market. At Blue Owl, more than 70% of its loan book is tied to software companies. 70%. That's not diversification, my friends. That is a concentrated bet on one sector that AI is actively, actively disrupting. Golub Capital, which has 26% software concentration, just cut its dividend by 15%, citing a surge in non-accrual loans. BlackRock TCP Capital disclosed that write downs from bad loans reduced its NAV by 19% in the fourth quarter of 2025 alone. And here's the development from this month that changes the math for everybody in the space. In early March 2026, JP Morgan Chase quietly began marking down the collateral value of software loans held by the private credit firms it lends to. Let me say that again. JP Morgan. JP Morgan, the largest bank in the United States, is looking at the same loan books these funds are carrying at full value and saying, uh-uh, we're cutting what we'll accept as collateral. When your lender says your assets are worth less than what you think they are, well, that's not an opinion. That is a margin call in slow motion. Now, let me show you the pressure building from the other direction. The BDC sector, business development companies, is sitting on a maturity wall. 23 out of 32 rated BDCs have unsecured debt maturing in 2026,$12.7 billion. That's a 73% increase over 2025. So you have funds whose borrowers are under stress, whose marks are lagging reality, and whose own debt is coming due this year. When your liabilities mature and your assets are deteriorating and your investors are asking to leave, the math does not get better by waiting. UBS has run the scenarios. In a severe AI disruption case, default rates in software heavy private credit portfolios could hit 15%. The stress scenario for Morgan Stanley that I mentioned yesterday, 8%. Is the conservative case, 15% in a market that told pension funds and endowments they were buying near zero losses is not a stress test number. That is a product description problem. The SaaS business model that these loans were underwritten against was sticky, recurring revenue, high gross margins, predictable renewal rates. That was the collateral story. What AI is doing to that story is this companies that charge enterprise clients hundreds of thousands of dollars per year for software are now competing with tools that do 80% of the same job for a fraction of the cost. Revenue lines are compressing, churn is rising. The EBITA multiples used to price these loans, built on 2021 era growth assumptions, don't reflect the company that exists today, clearly, but the loan balance on the fund's books still does. Here's what this means for your positioning. If you have exposure to BDC directly or through an ETF, the question is not whether the sector has stress. It certainly does. The question is which specific funds have a concentrated software exposure and which ones built portfolios with more industry diversity? A BDC with 12% software is a different product from one with 70%. They're not the same risk. They should not trade at the same spread. And if you have private credit exposure, the question to ask is this what percentage of your portfolio is loans to software or SaaS companies? And when was the last time that those loans were marked by an independent third party rather than the manager themselves? So your truth bomb for today is this the public market reprice SaaS by 30%. The private credit marks have not yet followed. JP Morgan is already treating those loans as worth less than the funds claim that they're worth. And$12.7 billion in BDC debt is coming due later this year. The catchdown is not a risk, it is a process that has already started. Join me every day for Wall Street Truth Bombs, where I drop them right here before the market figures.