Private credit fund selling $604 million of assets at 94% value as industry worries continue

NEW YORK – A private credit fund sold US$477 million (S$604 million) of assets at 94 cents on the dollar, at a time when investors have grown increasingly concerned about the risks underlying the US$1.8 trillion market.

New Mountain Finance, a business development company (BDC), said it was selling the assets for “the purposes of increasing portfolio diversification, reducing PIK (payment in kind) income and enhancing financial flexibility”, according to a statement on Feb 24. Company executives told investors late in 2025 that they were looking to sell as much as US$500 million of assets.

The move, though, comes just as broader concerns about private credit intensify. Just a week ago,

Blue Owl Capital permanently shut the gates on one of its funds

– preventing investors from withdrawing their cash every three months as they had previously been allowed – and started offloading some direct lending investments to return investor capital.

That sparked a US$2.4 billion drop in its market value, and a broad decline in shares of other private credit players including Ares Management, Blackstone and Apollo Global Management.

Activist investor Boaz Weinstein warned on Feb 24 about “the wheels coming off” in private credit, which is reeling from worries about overspending on artificial intelligence, exposure to software investments threatened by AI and lending standards.

A UBS Group report published on the same day said that private credit could see default rates surge as high as 15 per cent.

And money manager Danny Moses, made famous in The Big Short, said private credit and private equity firms’ push into retail products reminds him of the years preceding the sub-prime mortgage crisis.

New Mountain’s sale included full or partial investments in 15 of the BDC’s portfolio companies and valued the assets at their fair value as at Dec 31.  

The software sector makes up 22.2 per cent of New Mountain’s overall portfolio, just after business services at 22.4 per cent, according to the Feb 24 statement. 

New Mountain’s BDC saw its net asset value per share fall to US$11.52 in the quarter ended Dec 31, from US$12.06 the quarter prior, according to the statement. It also said it would reduce its dividend to 25 US cents per share from 32 US cents, due to rate cuts and credit spread compression. 

The company has repurchased US$30 million of shares since the end of the third quarter of 2025 and expects the repurchases to continue in 2026, “underscoring our confidence in NMFC’s (New Mountain Finance Corporation) long-term value”, chief executive John Kline said in the statement. BLOOMBERG