The Cockroach Is Real. So Is the Rest of the Building.

Jamie Dimon wasn’t wrong. But “private credit” covers more than the cockroaches — and the distinction matters.

David Jangro  ·  March 2026

It’s been a rough few weeks if your last name ends in “Capital” and your business involves lending money to companies that aren’t banks. In late February, Blue Owl — one of the most prominent names in private credit — gated redemptions on its OBDC II fund after withdrawal requests surged more than 200%. Days later, Blackstone disclosed that its $82 billion BCRED vehicle had received a record 7.9% redemption demand from investors — about $3.8 billion — in a single quarter. Shares of Blackstone, Apollo, Ares, KKR, and Blue Owl all sold off in sympathy. Jamie Dimon, never one to miss a moment, reprised his now-infamous line about cockroaches.

The anxiety is not manufactured. There are real problems in parts of the private credit market worth taking seriously. But as the industry dominoes have begun to wobble, the coverage has done something that financial media reliably does in moments like this: it reached for a broad brush.

“Private credit” is in trouble, the headlines tell us. Private credit is the shadow banking system. Private credit is the next 2008.

Private credit is a funding mechanism. It is not a risk profile.

A Label That Has Outgrown Its Usefulness

Private credit, in its simplest form, means lending originated by a non-bank entity. That’s it. The term encompasses a $2 billion covenant-lite unitranche loan to a private-equity-backed software company trading at twelve times EBITDA and a $500,000 senior secured loan against a concrete residential parcel in Millcreek, Utah. It encompasses PIK-laden leveraged buyout financing and first deed of trust bridge loans with defined exit strategies and hard asset collateral. It encompasses funds that promised retail investors quarterly liquidity on instruments that take five years to resolve — and operators who never made that promise in the first place.

Calling all of these things the same thing because they share an originator type is a bit like calling all bank loans equivalent because they all come from banks. By that logic, the 30-year fixed-rate mortgage on your neighbor’s house and the subprime CDO squared that nearly took down the global financial system in 2008 belong in the same sentence. They don’t. And neither do all the things currently traveling under the “private credit” label.

The stress we’re watching play out right now has a specific shape, and it’s worth naming precisely.

The Cockroach, Identified

The failure modes generating today’s headlines cluster around a specific strategy: leveraged corporate direct lending. Loans made to private-equity-backed operating companies, often at six to ten times EBITDA, where repayment depends entirely on the continued health and cash generation of the underlying business. Several things went wrong simultaneously in this strategy, and they are structural, not incidental.

First, covenant erosion. In a competitive deal market, lenders chased transactions by stripping out protections. Across leveraged loans broadly, over 90% of senior loans now carry no meaningful financial maintenance covenants — the early-warning mechanisms that historically gave lenders the ability to intervene before a deteriorating borrower became a defaulting one. When covenants disappear, lenders fly blind.

Second, PIK proliferation. Payment-in-kind provisions allow borrowers to satisfy interest obligations by adding to principal rather than paying cash. In a portfolio of operating businesses under stress, PIK becomes a way to defer and obscure problems rather than resolve them. By mid-2024, roughly 10% of BDC interest income industry-wide was coming from PIK — pencil yield, not cash yield.

Third, and perhaps most acutely in the Blue Owl case specifically: sector concentration in businesses directly exposed to AI disruption. When you’ve built a specialty lending franchise around software-as-a-service companies and the market begins to question whether generative AI renders many of those business models obsolete, the collateral doesn’t just deteriorate — it becomes conceptually difficult to value at all.

Fourth — and this is the one that caused the liquidity crisis rather than the credit crisis — the “democratization” of private credit created a structural mismatch that was always going to find its reckoning. Packaging five-year illiquid corporate loans into semi-liquid retail vehicles with quarterly redemption windows is not a product innovation. It’s a promise you can keep in calm markets and can’t keep when sentiment shifts.

None of these failure modes are inherent to private credit. They are inherent to a specific set of strategies, structures, and decisions made within a narrow corner of a very large and diverse market.

Different Logic, Different Risk Architecture

Real property lending operates under a fundamentally different underwriting premise — not because real estate is immune to cycles (it isn’t, and more on that shortly), but because the basis of repayment is a tangible, independently existing asset rather than a business’s projected future performance.

When a corporate direct lender underwrites a loan, the collateral is, in practice, the enterprise value of a going concern. If the business deteriorates, if its markets shift, if its customers leave, if AI makes its product category obsolete — the collateral deteriorates with it, and there is no floor other than whatever a distressed buyer will pay for a broken company in a rush. That’s a hard thing to lend against.

When a real estate lender underwrites a loan against a specific parcel of improved or developable property, the collateral has an independent existence. The building doesn’t lose its walls because the borrower’s income statement took a bad quarter. The land doesn’t move. The recovery is anchored to an asset that can be appraised, transferred, and liquidated through a defined legal process regardless of what happens to the borrower’s business affairs. Moody’s historical data captures this distinction cleanly: bank loans secured by hard assets have recovered an average of over 80 cents on the dollar at resolution, while senior unsecured corporate bonds — where recovery depends on enterprise value — average closer to 38 cents.

In corporate lending, covenants exist as a monitoring substitute — proxy mechanisms to detect deteriorating health when you can’t observe the collateral directly. In real estate lending, the deed of trust and the loan-to-value ratio do that structural work. The collateral itself is the covenant.

This doesn’t make all real estate lending safe. It makes sound real estate lending differently safe. Office CRE is genuinely impaired — secular demand shifts have done to office buildings what AI may yet do to SaaS companies. Large-scale development loans originated at 2021 valuations against 2021 cap rate assumptions carry real stress in markets where both have moved adversely. The point isn’t that real estate private lending is categorically better. The point is that it is categorically different, in ways that matter when you’re trying to understand where the risk actually lives.

Well-underwritten real estate credit — senior secured, conservatively leveraged against current market value, structured around a realistic exit path whether through refinance, sale, or payoff — is insulated from the specific failure modes driving the current moment. A bridge loan on a residential renovation project in a liquid market does not have AI exposure. It does not have covenant-lite documentation risks. It is not a retail liquidity vehicle promising quarterly exits on five-year paper. It has a borrower, a property, a lien, and a timeline.

Capital Has to Come From Somewhere

It is also worth noting that the private real estate lending industry didn’t manufacture the demand it’s serving. Following the regional banking crises of 2023, small and midsized banks — which historically held nearly 70% of all commercial real estate loans outstanding — pulled back sharply and durably. By Q2 2023, regional banks’ share of new CRE loans had dropped by 900 basis points in a single quarter, the largest such decline on record. By 2024, bank lending accounted for just 31% of the CRE lending pool, down from 44% two years earlier.

That capital doesn’t disappear. Developers still need to build. Investors still need to acquire. Communities still need housing. The question isn’t whether non-bank lenders fill that void — they will, and they should. The question is whether they do it with discipline: conservative loan-to-value ratios, thorough collateral analysis, realistic exit underwriting, and structures that don’t make promises the underlying assets can’t keep.

At Aspera Capital Solutions, that discipline is the operating principle. We lend against specific real assets, at leverage levels that preserve meaningful collateral cushion, with clear-eyed underwriting of both the borrower’s execution capacity and the property’s independent liquidation value. We don’t make retail liquidity promises. We don’t PIK our way through a stressed position and call it performing. We hold first lien positions on real property and we underwrite like the collateral is all we’ve got — because in a default scenario, it is.

The Right Question

The private credit moment we’re in right now will, eventually, produce better-calibrated thinking about what the term actually covers. The Blue Owl and Blackstone headlines are real. Some cockroaches are, in fact, cockroaches.

But a cockroach in the kitchen doesn’t mean the whole building is infested. And it definitely doesn’t tell you anything about the building next door.

Before drawing conclusions about “private credit,” it’s worth asking the questions that actually matter: What is the collateral? What happens in a default — does recovery depend on a business surviving, or an asset existing? What is the duration and the exit path? Who made the liquidity promises, and on what basis?

Those questions have very different answers depending on where you look. The label, on its own, tells you almost nothing.

David Jangro is a Principal and Co-Founder of Aspera Capital Solutions, a Utah-based private real estate lending firm specializing in senior secured bridge and direct loans across the Intermountain West. This post reflects his personal views and does not constitute an offer or solicitation to invest.