Alacrity Solutions found itself in a tough spot. The Indiana-based company helps property and auto insurers manage customer claims by taking calls, sending adjusters into the field and reviewing files. But a few clients made up much of its business, and last year it lost market share as some of them began to bring service in-house. It also saw a lull in claims filings because of changing weather patterns. And Alacrity owed a lot of money to private credit lenders—around $1.5 billion.
In January the company announced that it had to restructure. Lenders—including fund managers Antares Capital, Blue Owl Capital and KKR—took over ownership to salvage their investment. They’re hopeful for a turnaround, according to people familiar with the matter.
Private credit investors may be about to get more experience sorting out messes. Direct loans have rates that rise and fall along with prevailing interest rates, and payments are painfully high for the often-risky borrowers who turn to private lenders. There’s also a wall of maturities looming, when many companies will have to pay back principal or refinance if they can. A third of direct loans tracked by KBRA, a ratings organization, mature by the end of 2026.
Restructurings have always been a part of this market. But the past few years marked the dawn of a rambunctious era in lending. Loans got bigger, and direct lenders backed by investment funds displaced traditional banks. These lenders made some loans based on revenue, not on profit. “Over time, there will be more restructuring in private credit, purely as a factor of it being more prevalent in the market,” says Bill Eckmann, head of principal finance for the Americas at the bank Macquarie Group Ltd. in New York.
The ability to take the keys of the business from a borrower gives private lenders some protection—in extreme cases, the company itself is the collateral. But sometimes there are surprises. Educational software company Pluralsight Inc., which was owned by private equity fund Vista Equity Partners, moved some of its intellectual property to a new subsidiary in mid-2024, away from lenders including Blue Owl and Ares Management. Although the maneuver helped Pluralsight finance an interest payment to the existing lenders, it set off alarms in the private credit world.
Soon private credit funds were tightening up loan documentation with new so-called Pluralsight protections to disallow similar moves by their own borrowers. Fund managers were fielding calls from investors asking just how common the tactic might become. In the end, Pluralsight restructured, and the lenders took over the entire company, including its intellectual property. Vista’s investment was wiped out.
Private credit lenders often stress the safety of their loans for investors, in part because they can have such a strong hand with companies before and during restructurings. Private credit is part of the same tight-knit world as the private equity funds that own many of the borrowers. In fact, many of the biggest direct lenders are part of companies with buyout arms. Since private loans aren’t actively traded, there’s often time for lenders and owners to get together and work out terms when a company’s situation changes. For example, many private credit funds offer companies a chance to defer interest payments while adding to their loan balance. This flexibility can help a company grow faster or continue operating when money gets tight. But it also allows the company’s debt load to pile up and potentially create bigger problems down the line.
How many souring loans are out there? Only about 3% of companies with private credit debt are expected to default in 2025, according to KBRA DLD, a news service covering direct loans. But it can be hard for outsiders to tell which companies are in trouble. Just months before Alacrity restructured, funds valued its debt at a solid-looking 98 cents on a dollar of its face value. Things could have been worse: Bloomberg reported that when the lenders took the company over, majority owner BlackRock Inc., which bought Alacrity through an alternative investments arm, saw its equity investment go to zero.
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