Apollo CEO Warns of $1.8 Trillion Credit Shakeout as Default Rate Hits 5.8%
Apollo CEO Marc Rowan warns the $1.8 trn private-credit industry faces a prolonged shakeout after Apollo-affiliated BDC MidCap Financial cut its dividend by 18% to $0.31 citing software-loan losses. Apollo shares are down 30% YTD as sector defaults hit 5.8% through January and concentration risk intensifies.
1. CEO Issues Warning on Private Credit
At a recent industry event, CEO Marc Rowan cautioned that the $1.8 trillion private-credit market is entering a "foreseeable" prolonged shakeout. He emphasized the importance of disciplined underwriting and risk management to navigate rising sector stress.
2. MidCap Financial Cuts Dividend on Software Losses
Apollo’s affiliated BDC, MidCap Financial Investment, reduced its dividend by 18% to $0.31 per share after recording losses tied to software-company loans. The move underscores the impact of high tech concentration on credit portfolios.
3. Rising Defaults Signal Sector Strain
The U.S. private-credit default rate reached 5.8% through January 2026, the highest since the benchmark index began in August 2024. February saw eleven default events—nearly double last year’s monthly average—and scenarios project defaults could climb to 13% under severe AI disruption.
4. Impact on Apollo’s Portfolio and Stock Performance
With roughly 86% of its fee-earning assets in private credit, Apollo’s shares have fallen about 30% year to date. The downturn reflects broader market repricing of concentration risk and prioritization of senior, first-lien debt in restructuring.