Nearly $500 million in assets sold at a 6% discount! AI scares US private credit funds

The tension in the private credit market is shifting from “worry” to “pricing.” As investor concerns about AI-related risks, liquidity, and lending standards intensify, New Mountain’s funds in the U.S. have chosen to sell nearly $500 million worth of assets at a discount, reflecting increased industry pressure.

According to Bloomberg, New Mountain stated on Tuesday that one of its private credit funds sold $477 million of assets at “only $0.94 per dollar of assets,” aiming to diversify the portfolio and reduce PIK (payment-in-kind) income to enhance financial flexibility.

This disposal comes amid a significant rise in private credit risk discussions. A week ago, Blue Owl closed redemption windows for one of its funds and began selling some direct lending investments to return funds to investors, causing its market value to shrink by $2.4 billion and dragging down the stock prices of private credit-related firms like Ares Management and Blackstone.

Market alarms are ringing. Boaz Weinstein, founder of Saba Capital, said that private credit is in the early stages of collapse, with industry concerns focused on excessive AI spending, software investments threatened by AI, and lending standards.

A UBS report states that private credit default rates could surge as high as 15%, as the mismatch risk between funding sources and assets is being reevaluated.

New Mountain Discounted Deal: Lower PIK, Adjust Portfolio Structure

New Mountain describes this sale as an active portfolio rebalancing. The company says the goals include increasing diversification, reducing PIK income, and improving financial flexibility. Last year, senior executives told investors they planned to sell up to about $500 million in assets, and this deal nearly reaches that target.

From an industry perspective, the “$0.94 to $1” transaction price itself is a signal: in a stage where valuation and liquidity are more sensitive, discounted deals are more easily interpreted by the market as a “deleveraging adjustment” amid declining risk appetite.

New Mountain also disclosed that its overall portfolio comprises 22.4% in business services and 22.2% in software, the latter of which is also at the center of market discussions about AI’s impact on software business models.

Asset-side Returns Under Pressure: NAV Decline, Dividend Cuts

New Mountain’s financial indicators also reflect the transmission of pressure. The company states that its BDC’s net asset value per share fell from $12.06 to $11.52 in the quarter ending December 31.

Meanwhile, the dividend was cut from $0.32 to $0.25 per share, due to the squeeze on earnings caused by rate cuts and narrowing credit spreads.

The company said it has repurchased $30 million worth of stock since the end of Q3 2025 and expects to continue buybacks this year. CEO John Kline said this “demonstrates confidence in NMFC’s long-term value.”

Blue Owl Liquidity Turmoil Spillover: Valuation and Structure Repricing

A larger impact stems from industry-wide liquidity pressures. Bloomberg reports that after restricting redemptions, Blue Owl began selling some of its direct lending investments to return funds to investors. This event caused its market value to drop by $2.4 billion and led to a decline in stock prices of several private credit firms.

This chain reaction has prompted investors to re-examine the mechanisms of semi-liquid products: when redemption demands rise but underlying asset trading is illiquid, fund structures, asset valuations, and exit paths may all come under pressure, with risk premiums rising accordingly.

AI Concerns Add to Default Expectations: Discount Liquidation and “Bottom Fishing” Coexist

Discussions around AI are becoming part of the private credit risk narrative. Boaz Weinstein attributes the industry cracks to excessive AI spending, AI-threatened software investments, and lending standards issues, noting a market dislocation: some credit assets are at historic highs, yet related stocks and fund structures are heavily discounted.

His firms, Saba Capital and Cox Capital, have announced plans to launch cash tender offers for three Blue Owl-managed funds at 20% to 35% discounts to their net asset values, providing liquidity options for retail investors seeking to exit but facing redemption difficulties.

These offers involve Blue Owl Capital Corporation II and are planned to expand to Blue Owl Technology Income and Blue Owl Credit Income. Bloomberg reports that Blue Owl’s stock has fallen about 50% over the past year, despite the company’s revenue continuing to grow.

On the risk side, UBS Group AG’s estimate that default rates could reach up to 15% raises the outlook for future losses; on the funding side, Weinstein and others see the discounts as an opportunity window. For investors, the key variables are shifting from “yield levels” to “structural liquidity, valuation credibility, and the pace of re-pricing AI-related exposures.”

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