When Lloyd Blankfein tells you he “smells” a financial crisis, you pay attention. When the former Goldman Sachs CEO specifically points at private credit, and Apollo’s Marc Rowan warns of a coming “shakeout” in the same breath, you start making phone calls.
This week, Blue Owl Capital capped investor redemptions after requests hit $5.3 billion — roughly a fifth of its flagship fund. Its tech-focused fund fared worse, with 40.7 per cent of investors demanding their money back. Blue Owl’s response was to lock the exits, limiting withdrawals to five per cent.
They’re not alone. Apollo, Blackstone, BlackRock, JP Morgan, Ares, and Clearwater have all either capped or limited redemptions in recent months. The pattern is now unmistakable: private credit’s decade-long boom is facing its first serious stress test, and the results are not encouraging.
If you’re a CFO at a PE-backed business — particularly one financed through private credit channels — this matters to you directly. Here’s why, and what you should be doing about it.
The Scale of the Problem
Private credit has ballooned into a $3 trillion global market. In the UK alone, it’s grown 56 per cent since 2015 to $185 billion, making Britain the second-largest market after the United States, according to a recent House of Lords report.
The growth was driven by a simple narrative: banks retreated from mid-market lending after 2008, and private credit funds filled the gap. PE sponsors loved the speed, flexibility, and covenant-light structures. Borrowers loved the certainty of funding. Everyone was happy — while rates were low and defaults were rare.
That world no longer exists.
The trouble started in late 2025 with the back-to-back bankruptcies of auto lender Tricolor and car-parts manufacturer FirstBrands. Investor confidence eroded further as AI disruption fears began to bite — software companies account for roughly a fifth of all private credit loans, and investors are increasingly worried these business models could be hollowed out by artificial intelligence.
Then came the Iran conflict. Rocketing oil prices have fed into inflation, with the Bank of England’s Decision Makers’ Panel this week showing business inflation expectations jumping sharply — back to where they were last autumn. JP Morgan is now predicting rate hikes. Two-year gilt yields have climbed to 4.4 per cent. Higher-for-longer rates mean higher debt servicing costs, which means more pressure on portfolio companies, which means more defaults, which means more redemptions.
It’s a vicious cycle, and it’s accelerating.
Why CFOs Should Care
If your business was financed through a private credit fund that’s now gating redemptions, three things change immediately.
First, your lender’s priorities shift. A fund manager facing 20 per cent redemption requests while only allowing five per cent withdrawals is under enormous pressure to generate liquidity. That means tighter covenant enforcement, reduced flexibility on amendments, and a much harder conversation the next time you need a waiver or extension. The friendly, relationship-driven lender who offered you covenant-lite terms in 2023 may have very different priorities in Q2 2026.
Second, refinancing risk goes up. If your facility matures in the next 12 to 24 months, you’re refinancing into a market where private credit funds are hoarding liquidity, banks are cautious, and spreads are widening. The days of borrowers dictating terms are over. Expect tighter covenants, higher margins, and longer processes.
Third, your PE sponsor’s behaviour changes. Sponsors whose portfolio companies are financed through stressed private credit funds face concentrated risk. A sponsor with multiple portfolio companies borrowing from the same fund — or same family of funds — may suddenly find that a liquidity squeeze at the fund level cascades into operational constraints at the portfolio level. Smart sponsors are already mapping their fund-level exposure. If yours hasn’t raised this with you, raise it with them.
The UK Angle
Bank of England governor Andrew Bailey has drawn explicit parallels between the private credit boom and the subprime debt expansion that preceded 2008. That’s not idle commentary — the Bank has been actively examining the systemic risks posed by leveraged trading in the gilt repo market, and its latest feedback from market participants makes for uncomfortable reading.
Bond traders and hedge funds have warned that the Bank’s proposed reforms could actually “concentrate risks” during periods of stress, rather than dispersing them. Meanwhile, the proportion of UK government bonds held by short-term, highly leveraged hedge funds continues to grow at the expense of longer-term institutional holders.
For UK PE-backed businesses, the macro picture is particularly challenging. Inflation expectations are rising. Rate cuts have been pushed out — indeed, hikes are now on the table. Energy costs remain elevated because of the Middle East conflict. And the April 2026 National Insurance increases are about to land on employers’ balance sheets.
All of this hits at once.
What to Do About It
If I were sitting in the CFO chair at a PE-backed business right now, here’s what I’d be doing this quarter:
1. Map your lender exposure. Know exactly which fund or funds hold your debt. Understand their redemption dynamics, their liquidity position, and whether they’re gating. This isn’t information your lender will volunteer — you need to ask, and you need to read the signals.
2. Stress-test your covenants. Don’t wait for a breach. Model your position under adverse scenarios — particularly scenarios involving higher rates, lower revenue, and tighter working capital. If your headroom is thin, start conversations early. Lenders under pressure will not be patient with surprises.
3. Build a refinancing timeline. If your facility matures before mid-2028, assume the refinancing process will take twice as long and cost significantly more than last time. Start now. Build relationships with alternative lenders — including banks, which are selectively re-entering mid-market lending.
4. Secure your working capital. In a tightening environment, cash is king. Accelerate receivables, manage payables carefully, and build a liquidity buffer. This isn’t the time for aggressive capex funded by assumption.
5. Talk to your sponsor. PE sponsors need to understand the fund-level risks their portfolio companies face. If your sponsor has multiple companies with the same lender, concentration risk is real. A joined-up conversation — sponsor, CFO, and lender — is far better than three separate monologues.
6. Watch the Bank of England. If the MPC does hike — and the probability is growing — the knock-on effects for leveraged businesses will be material. Build rate sensitivity into every model you present to the board.
The Bigger Picture
Private credit isn’t going away. The structural drivers — bank retrenchment, institutional demand for yield, PE’s need for flexible financing — remain intact. But the market is going through a painful repricing of risk, and the funds that grew fastest by loosening standards the most are the ones now facing the sharpest redemption pressures.
For CFOs, the lesson is one that never goes out of fashion: understand your capital structure, know your counterparties, and don’t assume that the lending environment you borrowed in is the one you’ll refinance in.
The horses are whinnying in the corral. Time to check your fences.
Mark Hendy is a PE-facing CFO and the founder of Tanous Limited. For advisory support on capital structure, refinancing strategy, or PE portfolio management, get in touch at mark@tanous.co.uk.