This is the start of a big crisis for private credit, says Verdad's Rasmussen

Summary

• Dan Rasmussen frames the current private credit turmoil as the start of a major crisis, not a minor liquidity mismatch.
• He argues rapid lending growth never ends well, citing ~$2 trillion of inflows over 15 years into risky loans.
• These loans were made at 500-650 bps over SOFR to highly leveraged LBOs (5-6x EBITDA), equivalent to single-B rated securities.
• Citing Moody's data, he notes single-B securities have a 20% 5-year default rate and expects private credit defaults could exceed that rate.
• He states the 2008 regulatory push of risky LBO loans off bank balance sheets was the origin story for private credit, which is cyclical, not perennially profitable.
• He highlights a disconnect: public BDCs are down 30-40%, but many private interval funds are still marked at NAV, setting up for a wave of redemption requests.
• These redemptions will create liquidity issues, refinancing problems, and force a painful price discovery process.
• His clear trading view: the asset class is "nowhere near cheap," it's "too early to even consider going long," and the right action is to use it as a hedge by "shorting it on the way down."
• He confirms he is actively shorting BDCs.