Blackrock has written down the valuation of a private credit loan from 100% of its face value directly to zero, whereas just three months ago, the loan was still assessed at par. This marks the second instance of an abrupt 'write-down to zero' faced by its private credit division in recent times.
According to Zhitong Finance APP, Blackrock (BLK.US) directly wrote down the valuation of a private loan from 100% of its face value to zero, whereas just three months prior, the loan was still assessed at par. This marks the second sudden "zeroing out" case encountered by its private credit division recently.
As per the fourth-quarter filing last week by TCP Capital Corp., a subsidiary of Blackrock, a loan of approximately $25 million provided to Infinite Commerce Holdings is now deemed worthless. Infinite Commerce, an Amazon aggregator, operates a variety of products ranging from spa items to light bulbs by acquiring online sellers. The company had valued this subordinated debt at 100% of par in the third quarter of last year.
This write-down occurred only months after Infinite Commerce merged with Razor Group, another Amazon aggregator and Blackrock debtor, in August of last year. The merger created a new debt structure that was still valued close to par at the time. Previously, Blackrock's valuation of Razor's loans was already at a severely distressed level.
Like other private credit lenders, Blackrock is facing a sharp reversal in the Amazon aggregator industry. The sector boomed rapidly during the pandemic due to a surge in online shopping but has recently drawn attention for frequent debt restructurings. Another lender to Infinite Commerce, Victory Park Capital, also fully wrote off its investment in filings as of December 31, attributing the underperformance to weak demand and rising inventory costs caused by tariffs.
Although this is a relatively small loan within a problematic niche market, its sudden devaluation highlights what critics identify as a key issue in private credit: valuations of illiquid loans often lag behind the deterioration in the financial health of underlying businesses. In the months leading up to Zips Car Wash's bankruptcy protection filing, its private credit backers still valued its debt close to par.
Notably, in November last year, Blackrock had already slashed the value of its private debt to Renovo Home Partners to zero. Renovo, a company formed by private equity firm Audax Group in 2022 through the consolidation of several regional kitchen and bathroom renovation enterprises, suddenly filed for bankruptcy in early November last year and announced plans to shut down operations. This bankruptcy directly led to a sharp reduction in Blackrock's valuation of Renovo’s private debt. Philip Tseng, CEO of TCP Capital Corp., emphasized at the time regarding Renovo's outcome, “We believe this reflects issues specific to the issuer rather than a reflection of overall industry weakness.”
According to the fourth-quarter filing, Blackrock TCP Capital Corp. also partially wrote down its position in SellerX. TCP Capital Corp. stated in the filing that 91% of its portfolio markdowns stemmed from transactions underwritten in 2021 or earlier, which faced challenges due to "persistently high interest rates."
These moves have heightened market concerns over defaults and underwriting standards in the $1.8 trillion private credit market. The industry's substantial bets on software companies threatened by AI have led anxious investors to make unprecedented redemption requests.
It is reported that Blackstone Group (BX.US), a global private equity giant, saw its flagship private credit fund, BCRED, experience the largest capital withdrawal since its inception in the first quarter of 2026. According to the latest disclosed data, the fund experienced net outflows of $1.7 billion in the previous quarter, a figure that not only broke historical records but also directly triggered market panic.
The trigger for this turmoil was not an isolated event but a chain reaction of credit risk contagion within the industry. Earlier, Blue Owl Capital (OWL.US), another leading private credit institution, announced that some of its funds would suspend redemptions, quickly shattering the market’s illusion of such assets being “high-yield, low-volatility.”
Over the past decade, the global private credit industry expanded rapidly to reach a scale of $2 trillion, but it is now facing multiple challenges: valuation inflation and lack of transparency have raised market doubts; unconventional practices like Blue Owl’s use of 'promissory payments' instead of fulfilling client redemptions have exacerbated trust crises; and last year’s concentrated bankruptcies of U.S. auto parts suppliers and subprime auto loan institutions exposed significant risk exposures among some participants.
This series of shocks has yet to subside, as Market Financial Solutions Ltd., a UK mortgage lender, collapsed unexpectedly last Friday, once again shaking the market. Wall Street lenders are generally concerned that this may just be the tip of the iceberg – as the industry adage 'cockroach theory' suggests, when one institution collapses, it often signals more hidden issues brewing beneath the surface.
Nevertheless, top private credit lending institutions continue to report strong relative returns. A point of contention in the market outlook is highlighted by Apollo Global Management CEO Marc Rowan, who warned of an upcoming shakeout in the private credit industry. On the same day, Ares Management CEO Michael Arougheti stated that the prediction by UBS Group analysts last week that private credit default rates could reach 15% was “completely incorrect.”
