Software as a Shock: The Software Liquidity Signal in Private Credit
A simplified analysis of what happens when AI-driven disruption collides with peak‑vintage (2021–2022) buyout leverage.
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Investors are starting to move past the “hibernation” mindset that followed First Brands and Tricolor, when the industry framed the damage as isolated. The bigger realization is simpler: private credit only looks stable as long as marks hold and liquidity stays calm. Once those assumptions crack, bondholders start asking the obvious question—what collateral is really there, and what are we being paid for?
Today we’re sharing our November 2025 work on why BDCs are a pressure point, and why we expect this credit deterioration to continue, not just in parts of ABS, but across private credit structures that were built for a different cycle. The common thread is that ABS, ABL, and private credit are the catalyst.
Most importantly, we lay out how private-credit platforms have been pushing risk outward using retail and retirement capital as the marginal buyer and, in practice, the exit liquidity.
Our work in Private Credit so far:
The Darkside of Finance: NDFI & Private Credit’s Formidable Partnership with Banks.
Blue Owl at the Fault Line of Private Credit: PIK+BDC = Another “Isolated Event
Private Credit, the Illusion of a Middle Class, and Lights-Out Holidays
Who’s Really Funding BNPL? – Part 1: Private Credit Bears the Risk
Unhinged Finance: Shadow finance is now half the global financial system
Private Credit’s New Risk Dump: Retirement Savers and Consumer Debt
Today
Blue Owl Capital Inc., which initially focused on financing software businesses, led the decline, tumbling as much as 13% before closing at the lowest level since September 2023. Ares Management Corp., KKR & Co. and TPG Inc. each fell by more than 10% at one point, while Apollo Global Management Inc. and Blackstone Inc. dropped by as much as 8%.
BUT, WHY THOUGH? What is the real, underlying reason?
The core issue is that private credit became a major lender to software buyouts just as the economics of many software models began to shift. AI is compressing the value of “legacy” software in certain categories, which threatens revenue durability and reduces the pool of buyers willing to pay up for non-AI-native assets. For lenders, that matters because software collateral is mostly intangible. If cash flow weakens and exits get harder, recoveries can become nonexistent, fast.
Let’s break down what we mean by Private Credit Software Risk.
We’re going to keep this simple: a set of clear, digestible nuggets that explain how the exposure was built, where the pressure is showing up, and why “isolated” events can continue to become a broader catalyst.
We’re also publishing a fact-based “hit list” of software names with publicly documented links to private credit and/or observable credit-market stress tied to the AI-driven software shock.