Steve Eisman

So you have one downgrade of a fund because its non-accruals were too high.

I think they were 5.5%, which is probably the highest in the industry.

um you have an in what the there's private credit there are three parts to private credit there's direct lending there's asset-backed lending and then call it other the biggest category is direct lending and then asset-backed lending um direct lending which gets the most press 80 of that business

is basically private credit lending money to private equity to buy companies what makes this sort of incestuous is that most private credit funds are run by private equity companies so in a sense what you have is private equity raising money in its private credit funds to lend to itself to go buy the companies that it wants to buy if that sounds circular it's only because it is

So 80% of private credit is related to that.

Now, between 2018 and 2022, private equity went on a buying binge of software companies.

Yep.

Now, that looked like a great decision because, you know, for the last 30 years...

The best place in tech to be was in software.

You have the SaaS model software as a, I think it's called software as a service model where you pay monthly.

So everybody loves that because it's so easy to model.

Software companies have done exceptionally well as technology has grown and they went on a buying binge.

So apparently about 25% of all direct lending companies

is in software companies that were bought between 2018 and 2022.

Now, those companies were bought when interest rates were considerably lower than where they are today.

A lot of that happened during COVID.

And about 11% of those loans are going to need to be refinanced next year.

and another 20% are going to need to be refinanced the year after that.

And if they are refinanced at all, they're going to be refinanced at considerably higher interest rates.

So that's a problem.