Apollo Global Management (NYSE:APO) executives are in discussions for a potential sale of its $3 billion MidCap Financial Investment (MFIC) fund.
MFIC is a publicly listed business development company (BDC) focused on private credit. Apollo purchased MidCap in 2013 to boost its direct lending platform. The fund is expected to attract interest from rival BDCs, with a potential deal structure involving the acquirer offering shares of its own fund as consideration, according to a report seen by the Wall Street Journal.
The fund's default rate climbed to 5.3% in the first quarter, up from 3.9% at the end of December, while management has spent part of the year buying back shares as they traded well below net asset value.
Fitch Ratings 2026 outlook for BDCs noted that the sector is "deteriorating, reflecting expectations for further pressure on net investment income (NII) and dividend coverage, and the potential for reduced funding flexibility and liquidity if secured credit facilities are used to refinance 2026 unsecured debt maturities or fund redemptions," according to a report.
The ratings company also expects BDCs to face a competitive underwriting environment and for non-accruals to remain above historical averages in 2026.
The $3.5 trillion private credit market is facing increasing scrutiny amid rising concerns about liquidity, valuations, and risks tied to AI. Major banks have reported more than $108 billion in exposure.
This has led to increased redemption requests in some of the largest private equity funds.
Firms such as Apollo Global, Ares Management, BlackRock, JPMorgan, and Morgan Stanley have all capped redemptions after investors have requested a large number of withdrawal requests driven by concerns surrounding the private credit sector.
Goldman Sachs (NYSE:GS) revealed that its private credit fund saw redemption requests of just under 5% of shares in the first quarter
Meanwhile, Oaktree Capital Management elected to fully satisfy all redemption requests for 8.5% of its private credit fund for the first quarter. Oaktree Strategic Credit Fund (OSC) plans to repurchase approximately 13.9 million shares, representing 6.8% of its outstanding shares, Reuters reported.
Photo: Image by Piotr Swat via Shutterstock
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