Wall Street's sprint into private credit hits its first liquidity wall.

Bank of America committed $25 billion of its own balance sheet to private credit deals this week.^{1 2} The same week, Blue Owl Capital permanently restricted investor redemptions from its flagship retail debt fund after dumping $600 million in loans at near-par.^{5 6}

Two of the biggest stories in private credit this year. One says the opportunity has never been bigger. The other says the risks have never been more real. If you are an alternative lender, both of these stories are about your future.

Key Developments:

On February 19, Bank of America announced it would deploy $25 billion through its capital markets unit within the investment banking division, according to an internal memo first reported by Bloomberg.^{1 2} Bruce Thompson, vice-chair and head of enterprise credit, said the commitment "further strengthens our ability to meet the evolving needs of our corporate and private equity clients and to drive strong returns for our shareholders."³

Two leadership appointments accompanied the announcement: Anand Melvani was named head of private credit within global capital markets (keeping his role as head of Americas leveraged finance), and Scott Wiate will lead private credit structuring and underwriting.^{3 4}

This is not an experiment. This is BofA telling the market: we are a direct lender now.

They are not alone. JPMorgan Chase previously allocated $50 billion to higher-risk, private equity-backed borrowers.^{3 4} Goldman Sachs and Morgan Stanley are deploying capital through in-house wealth and asset management vehicles.³ Citigroup partnered with Apollo Global Management in 2024 on a separate $25 billion direct lending initiative. Wells Fargo did the same with Centerbridge Partners.^{3 4}

The private credit market has ballooned to $1.8 trillion domestically, with global AUM hitting $3.5 trillion according to AIMA.⁸ Morgan Stanley projects the market will reach $5 trillion by 2029.⁷ Global deployment surged 78% year-over-year in 2024, hitting $592.8 billion.⁸

Wall Street is not tiptoeing into this space. It is sprinting.

Forty-eight hours before BofA made its announcement, Blue Owl Capital revealed the other side of this story.

Blue Owl permanently eliminated quarterly tender offers from its nine-year-old retail debt fund, OBDC II, which holds about $1.6 billion in assets.^{5 6} The fund had already sold $600 million in direct lending investments, roughly 34% of its total commitments, to four North American pension and insurance buyers at 99.7 cents on the dollar.⁵ Blue Owl's tech-focused vehicle, OTIC, saw redemption requests spike to approximately 15% of NAV.⁶

Instead of allowing individual investors to exit via tender offers (previously capped at 5% per quarter), Blue Owl will now distribute 30% of OBDC II's net asset value over 45 days as a return-of-capital payment to all shareholders.^{5 6} That is six times the prior redemption cap, but it is not the same as letting investors leave when they want.

Blue Owl's stock dropped 3% in pre-market trading. CNBC called it a "canary in the coal mine" for private credit.⁶

The sales happened at 99.7% of par, which Blue Owl cited as validation of its portfolio markings. But the forced nature of the transaction, the shareholder lawsuits over liquidity disclosure, and the failed merger proposal that investors rejected over potential losses all tell a different story: retail money flowing into illiquid private credit vehicles creates structural fragility that can break under redemption pressure.^{5 6}

Banks with $25-$50 billion balance sheet commitments will compete most aggressively in the $50 million to $500 million deal range, compressing spreads on sponsor-backed transactions. If you are an MCA provider, factoring company, or revenue-based financing firm operating in the sub-$5 million segment, the direct competitive pressure is limited for now. But capital flows downstream. When banks flood the upper-middle market, displaced borrowers and lenders move into your territory. Monitor spread compression in $50M+ deals through 2026.

Not yet, but prepare. BofA's deals will flow through its capital markets unit with full bank-grade compliance infrastructure. Your speed advantage (24-48 hour funding versus weeks for bank underwriting) remains a genuine differentiator, and it may become your most important one. Document your turnaround times. Build case studies around speed-to-close. When borrowers start shopping bank rates against your terms, you need to win on execution, not price.

Blue Owl's forced asset sales demonstrate that private credit liquidity assumptions can break under redemption pressure. If you rely on warehouse lines, securitizations, or institutional LP capital for your lending operations, stress-test your funding structures now. Run scenarios for 20-30% drawdowns. Diversify beyond two or three bank partners. The BDC redemption wave may tighten funding availability for non-bank lenders as banks reassess counterparty risk across the private credit ecosystem.

Yes. The Citigroup-Apollo and Wells Fargo-Centerbridge models show that banks often partner with alternative managers rather than building from scratch. If you originate strong deal flow in a specific vertical (MCA, factoring, equipment finance, construction lending), you are a potential pipeline for bank-backed platforms seeking deployment channels. Smaller alternative lenders positioned as origination partners could benefit significantly from the institutional capital wave.

Technology and software. Blue Owl's problems are concentrated in tech-focused lending. Its OTIC vehicle (focused on technology companies) experienced the sharpest redemption spike.⁶ Growing concentration of private credit in software companies facing AI-disruption-driven valuation compression adds sector-specific risk. If your portfolio skews toward tech-adjacent borrowers, diversify now. Traditional industries (construction, manufacturing, services) carry less valuation compression risk.

Watch Blue Owl's loan sale pricing as a benchmark. If 99.7 cents on the dollar becomes the floor for institutional private credit sales, haircut your originations by 50-100 basis points to stay competitive with secondary market pricing. Build cash buffers: target 10-15% liquidity reserves, up from the standard 5%, funded by equity rather than debt. The era of assuming hold-to-maturity as your default strategy may be ending.

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Fat Brands, the $1 billion-in-debt parent of Fatburger, Round Table Pizza, and Fazoli's, is fighting hedge fund creditor 352 Capital over who controls cash flows from five securitization trusts used to fund bankruptcy operations.⁹ CEO Andy Wiederhorn directed a $3.1 million share sale 48 hours after the first bankruptcy hearing without court approval, triggering bondholder demands for his suspension.⁹ For alternative lenders: if the court rules securitization receivables belong to lienholders (not the debtor), it sets precedent that could block MCA and revenue-based financing remittances in future franchise bankruptcies. Audit your borrower structures for shell entities and senior liens.

Riverside's Acceleration Capital Growth Lending Fund III closed at $200 million, targeting B2B software companies with $2.5M+ ARR and 20%+ growth.¹⁰ Already 20% deployed across 18 investments within four months. This institutional capital is moving into the same revenue range where alternative lenders operate, with 10-year fund horizons and operational support that MCA and RBF providers cannot match. The competitive moat: specialize in verticals Riverside will not touch.

The Fed's January 2026 SLOOS shows banks easing CRE lending standards for the first time since mid-2022, with 93% of large banks expecting standards to ease or hold through 2026.¹¹ The critical detail for alternative lenders: while CRE eases, commercial and industrial (C&I) lending standards continue to tighten. Banks are shifting focus toward real estate and away from business lending. Your factoring, MCA, and equipment finance products are counter-cyclical to bank behavior right now. That is a genuine competitive moat for the next 12-24 months.

FinTech lenders now control 42% of unsecured personal loan originations, up from roughly one-third a year earlier, with subprime borrowers leading a 32.5% year-over-year origination increase.¹² Total unsecured personal loan balances hit a record $276 billion. Delinquencies are projected at 3.75% (60+ DPD), up 1 basis point. The consumer credit market is normalizing around FinTech dominance and rising risk. Alternative business lenders cannot compete on consumer scale; compete on speed, underwriting sophistication, and access to overlooked segments.