Lens on Private Credit

Structural Factors Affecting Private Credit

The illiquidity of private credit is accepted by institutional investors who often have longer-term investment horizons than retail investors. The opportunity for potentially higher returns over time, however, comes with limited redemption windows—which can cause distress for investors with lower risk tolerance. Semi-liquid funds offer retail investors more flexibility but feature stringent withdrawal caps to protect fund dilution.

Ultimately, the influx of redemption requests experienced in early 2026 emphasizes a foundational element: confidence in private credit valuations underpins trust in the asset class itself. Consistent application of best practices around private credit valuations are paramount—both in times of distress and calmness.

Restructuring for the Future

Credit cycles will inevitably have fallout that necessitates some restructuring. Providing solutions that restore confidence, unlock value and drive long-term success are crucial. Even when adhering to valuation best practices, situations can go south; structural remediation can preserve value. Further, bad-actor potential in private credit exists—as in any market.

As private credit loans are illiquid, it is important that lenders fix or stabilize portfolios. Restructuring is core to value recovery and can reduce defaults, turning a potentially distressed situation into a better opportunity.

In the current private credit environment, restructuring activity is increasing as borrowers face higher financing costs and tighter liquidity. Lenders are generally incentivized to preserve value and avoid forced defaults, but outcomes depend on capital structure complexity, documentation strength and sponsor alignment.

The problem can be as simple as an inability to roll over existing assets and raise funds, or as complex as recovery from fraudulent activity to preserve portfolio value. Restructuring solutions—even when fund managers adhere to rigorous best practices—are a necessary component of the credit cycle.

Restructuring approaches fall into several main categories: amend-and-extend, liquidity solutions, balance sheet restructuring, liability management exercises, formal insolvency processes and asset-level solutions.

Kroll is uniquely positioned to help at all phases of the credit cycle, offering independent third-party valuations, a robust Private Credit Benchmarks platform, due diligence and innovative restructuring capabilities.