Blue Owl's Turmoil Chills the Private Credit Boom

Internal warfare at $35 billion asset manager Blue Owl Capital is doing more than just embarrassing its founders—it's freezing an entire market that's become the go-to funding source for thousands of companies worldwide.

The private credit industry, which promised to be a safer, smarter alternative to traditional bank lending, suddenly looks a lot less reliable when one of its poster children can't even manage its own house.

When the Music Stops

The troubles started with a classic corporate soap opera: co-founders fighting over control, strategy, and presumably, money. But the ripple effects are anything but entertaining for the companies that depend on private credit for survival.

Blue Owl built its reputation by lending to mid-market companies at rates 2-3 percentage points higher than traditional bank loans. The pitch was simple: we're more flexible, faster, and less bureaucratic than banks. Companies bought it, and so did investors hungry for yield in a low-rate world.

Now, with internal chaos at one of the sector's biggest players, investors are asking uncomfortable questions about the entire $1.5 trillion private credit market.

The Real Winners and Losers

Small and mid-sized companies are feeling the squeeze first. These businesses, already shut out of traditional bank lending due to stricter regulations post-2008, relied on private credit as their lifeline. Now that lifeline is getting more expensive and harder to access.

Traditional banks, meanwhile, are quietly celebrating. JPMorgan Chase and Bank of America are already reaching out to companies that might be reconsidering their private credit relationships. The irony is thick: the industry that positioned itself as the bank-killer might be driving business back to banks.

Institutional investors—pension funds, insurance companies, sovereign wealth funds—are the ones with the most to lose. They poured money into private credit funds expecting steady, above-market returns with lower volatility than public markets. The Blue Owl drama is a stark reminder that "alternative" doesn't always mean "better."

The Numbers Don't Lie

Private credit grew from practically nothing to $1.5 trillion in assets over the past decade. That's not just growth—that's a fundamental shift in how corporate America gets funded. But rapid growth often masks underlying problems.

Spreads on new private credit deals have already widened by 50-100 basis points since the Blue Owl news broke. Translation: companies are paying more to borrow, and some are getting shut out entirely. The "democratization of credit" that private lenders promised is looking more like a luxury good again.