From Jamie Dimon’s ‘cockroaches’ to the Blue Owl freeze: How stress is spreading in private credit

Published Mon, Feb 23 202611:52 PM ESTUpdated Tue, Feb 24 20261:30 AM EST

Lee Ying Shan @in/ying-shan-lee @LeeYingshan

Key Points

Private credit's meteoric rise to a roughly $3 trillion cornerstone of global finance is being challenged.
A recent cascade of bankruptcies, fraud charges and liquidity strains is testing the industry's boom.

Private credit's $3 trillion boom is facing its most serious test yet. A string of bankruptcies, fraud indictments and redemption freezes is exposing vulnerabilities in the fast-growing corner of finance that flourished in the post-2008 era of low rates and loose liquidity. "The 'Golden Era' of private credit just hit a wall. Blue Owl Capital 's decision to permanently halt redemptions for its $1.6B OBDC II fund isn't just a corporate hiccup," said Jian Liu, Founder and Managing Partner at Lionhill Wealth Management. "It's a systemic warning sign for the entire non-bank financial ecosystem," he added. Here's a timeline of the industry's recent stress points: September 2025: Tricolor and First Brands' bankruptcies Concerns over private credit's exposure to highly leveraged borrowers sharpened last September after the twin collapses of First Brands Group, an auto-parts manufacturer backed by Apollo Global Management, and Tricolor Holdings, a U.S.-based auto lender focused on subprime borrowers. Tricolor filed for Chapter 7 bankruptcy on Sept. 10 after its subprime auto lending and used-car operations unraveled amid fraud concerns and tightening credit from warehouse lenders. First Brands, whose subsidiaries manufacture spark plugs, windshield wipers, filters, brake components and other automotive replacement parts, filed for Chapter 11 bankruptcy on Sept. 28 . Banks, including UBS O'Connor and Jefferies Financial Group, had extended hundreds of millions of dollars to Tricolor and First Brands before both collapsed in the same month, heightening Wall Street concerns about contagion in private credit and leveraged lending markets. October 2025: 'Cockroaches' galore? In October, following the bankruptcies of Tricolor and First Brands, Jamie Dimon, CEO of JPMorgan, pointed to signs that corporate lending practices had grown too lax over the past decade . "When you see one cockroach, there are probably more. Everyone should be forewarned of this one," Dimon said. Although JPMorgan avoided losses on First Brands, it had exposure to Tricolor, resulting in $170 million in charge-offs during the quarter, CFO Jeremy Barnum said. Charge-offs occur when loans are deemed unlikely to be repaid. "It is not our finest moment," Dimon noted of the Tricolor episode. December 2025: Tricolor execs charged U.S. prosecutors charged senior executives of Tricolor with running what they described as a yearslong "systematic fraud" that rattled parts of the banking sector. According to an indictment unsealed in Manhattan , founder and CEO Daniel Chu and COO David Goodgame allegedly carried out fraudulent schemes from at least 2018 through September 2025. Prosecutors said the duo inflated the value of Tricolor's loan collateral, allowing it to raise billions from lenders and investors. January 2026: First Brands founders charged First Brands Group founder Patrick James and his brother Edward were charged in New York with allegedly defrauding lenders of billions of dollars before the auto parts company filed for bankruptcy. During a bankruptcy court hearing in Houston on Jan. 29, a judge approved short-term funding from GM and Ford . First Brands began scaling back parts of its North American operations while seeking buyers for certain assets. February 2026: 'Saas apocalypse' and Blue Owl The move isn't limited to past lending decisions. Investors are increasingly scrutinizing the sectors that private credit has leaned on most heavily in recent years, particularly enterprise software. Shares of firms with sizable exposure to private credit sank sharply in early February amid concerns about their ties to sectors facing disruption from artificial intelligence , particularly software. That included the likes of Ares Management, KKR, Apollo Global, BlackRock, TPG and Blue Owl Capital. Investors fret that AI tools, including Anthropic's Claude Code, could erode future revenue growth and compress margins by enabling companies to develop software in-house. Enterprise software companies have been a favored sector for private credit lenders since 2020, according to PitchBook. Subsequently, in the second half of the month, Blue Owl permanently restricted withdrawals from one of its retail-focused debt funds, saying it would stop offering quarterly redemptions for Blue Owl Capital Corp. II and instead return capital periodically as it winds down the portfolio. Blue Owl Capital Corp. II is structured as a business development company, an investment vehicle marketed to U.S. retail investors that lends to small and mid-sized private companies and is a major part of the private credit market. Last Friday , activist hedge funds Saba Capital Management and Cox Capital Partners launched tender offers to buy a portion of shares in three Blue Owl Capital private credit funds. The move aimed to provide liquidity to retail investors amid rising industry-wide redemption requests and multiple quarters of net outflows. What's next? The recent turmoil is testing some of the foundations that powered private credit's rapid growth, including aggressive underwriting, highly leveraged middle-market borrowers and the promise of stable capital insulated from bank-style runs. Instead, lenders are now grappling with rising defaults, fraud scrutiny and, in some cases, redemption pressure from retail funds. Still, the strain does not point to a collapse of the roughly $3 trillion industry. Capital is still flowing, and large asset managers continue to raise funds . Global private credit fundraising rose in 2025 , although the pace of growth slowed from the previous year. Funds that reached final close by Dec. 16 had raised $224.25 billion worldwide, up 3.2% from the $217.38 billion collected in 2024, according to With Intelligence, part of S & P Global Market Intelligence. That compared with a 9.7% year-over-year increase recorded in 2024. While the era of easy, equity-like returns is fading as the asset class matures and competition intensifies, private credit's growth phase is not over just yet, said PitchBook analyst Kyle Walters. The Blue Owl episode may ultimately serve as a learning moment for the industry, Walters added. "It becomes a learning experience, and managers, including Blue Owl, find better ways to maintain liquidity avenues for these retail products."