Octus

In case you missed last week's episode of The Octus Download 🎙️ CEO and Founder Kent Collier joins Jason Sanjana and Kevin Eckhardt to talk about the growing debate around software companies and the lenders behind them. Plus: JFK Jr., the bar exam, and a very spirited debate about Love Story. 🎧 Listen now: 🍎 : ow.ly/Lsob50YpXIE 🟢 : ow.ly/MBBq50YpXIL

My take: The best opportunity in the market is setting up a fund/vehicle to buy dislocated private credit loans from forced sellers. My credentials: I run the leading information and data provider on the global credit markets (@OctusCredit). I was buying bank debt in the 60s in the fall of 2008 that eventually refi'd at par, including from the Lehman desk auction. I am very bullish on software and think the Citrini thesis is flawed. I reached out to them to debate me on our podcast. Two quotes from Seth Klarman have guided my investing for over 20 years: 1) "My experience is that when people want to give something away at a ridiculous price because they have to, not because they want to, that’s a good time to buy." 2) "The best opportunities for value investors often arise when other investors are forced to sell, regardless of price." Over the past couple of weeks, headlines have rolled in about redemptions coming from public and private credit funds: ""Morgan Stanley Limits Redemptions at $7.6B North Haven Fund After Withdrawal Requests Hit 11%" (March 12, 2026)" "Cliffwater Limits Repurchases to 7% After Record 14% of Investors Seek Exit From $33B Flagship" "Blue Owl Gates OBDC II as Hedge Funds Circle With 35% Discount Buyout Offers" (March 10, 2026) Another headline: "Private Credit ETFs Plunge 18% in Two Weeks as 'Gating' Fears Spread to Publicly Traded Vehicles" I believe these headlines will continue. Investors should get used to them. Or as George Soros' concept of reflexivity: our perceptions of reality don’t just reflect reality—they actively change it. Or in steps... 1. The Bias Investors believe private credit is a "magic" asset class: high yields with low volatility. They assume "semi-liquid" funds mean they can always get their cash back quarterly. 2. The Action A $1.7 trillion wall of cash pours in. This massive liquidity makes the underlying borrowers (software companies) look healthier than they are, "validating" the initial bias. 3. The Pivot AI threats / Citrini thesis emerge. A few "smart money" investors doubt the fund valuations and submit redemption requests to test the exit. 4. The Spiral Funds hit their 5% withdrawal caps and "gate" the doors. This act of self-preservation signals "danger" to the rest of the herd, turning a small exit into a mass panic. 5. The New Reality The perception of a "safe haven" has been reflexively destroyed. The asset is now a liquidity trap, creating the "forced sellers" that Seth Klarman waits for. Soros once wrote: "Financial markets, far from accurately reflecting all the available knowledge, always provide a distorted view of reality. The degree of distortion may vary from time to time; sometimes it’s quite negligible, at other times it is quite pronounced." If redemptions still continue and private credit is considered an asset to avoid, more investors will ask for their money back. And more funds will be forced to sell assets inside these funds. The underlying businesses haven't changed. The huge cash equity checks beneath these loans haven't changed (Yes LTV has changed because multiples have compressed but cash is still there). The maturity profile hasn't changed. Revolvers are still available. The one thing that has changed is the reflexivity of the new reality and people are rushing for the doors in an illiquid market = buying opportunity. Here is some simple math: If you buy a loan at 90, with a SOFR + 500 floating rate coupon that matures/refis at par in 3 years your return is ~13%. If you buy a loan at 80, with a SOFR + 500 floating rate coupon that matures at par/refis in 3 years your return is ~18%. If you buy a loan at 75, with a SOFR + 500 floating rate coupon that matures/refis at par in 3 years your return is ~21%. I view these as the absolute LOW returns. I believe returns will be materially higher for 2 reasons: 1) The AI/Citrini thesis will be proven wrong shortly throughout this year as software companies report good numbers in Q1, Q2 and Q3 2) In the very off-chance you get to own the keys of these companies, buying a software company through a restructuring has the chance of MOICs over 2.0x taking into effect rights and equity discounts. All told: As I said on our podcast, I think this could be a once in a generation opportunity to buy assets with MINIMUM mid teen returns, very little chance of capital loss with potential huge upsides. I do not think an investor should BLINDLY buy everything being force sold by a private credit fund or BLINDLY buy every software company out there. But this is so overblown its creating an opportunity for the best credit investors in the world to set up vehicles to absolutely crush it. An alpha, not a beta trade. The table is being set. The smart funds are already setting up to capitalize on this opportunity as it plays out over the rest of the year.

JPMorgan is preparing to launch a cross-border multibillion-dollar debt package for Electronic Arts’ $55B LBO, but AI-fueled software volatility has hit pricing hard: USD and EUR debt has widened about 100 bps in recent weeks, sources say.

Ensemble Health Partners has kicked off a dual-track sale and IPO process, sources say, with JPMorgan running the auction and Goldman Sachs advising on the IPO. The Warburg Pincus/Berkshire-backed RCM company generates EBITDA in the low-$700M range.

See also: @OctusCredit

Wise (banger) words from today’s SCOTUS ruling (Gorsuch)… “For those who think it important for the Nation to impose more tariffs, I understand that today’s decision will be disappointing. All I can offer them is that most major decisions affecting the rights and responsibilities of the American people (including the duty to pay taxes and tariffs) are funneled through the legislative process for a reason. Yes, legislating can be hard and take time. And, yes, it can be tempting to bypass Congress when some pressing problem arises. But the deliberative nature of the legislative process was the whole point of its design. Through that process, the Nation can tap the combined wisdom of the people’s elected representatives, not just that of one faction or man. There, deliberation tempers impulse, and compromise hammers disagreements into workable solutions. And because lawsmust earn such broad support to survive the legislative pro- cess, they tend to endure, allowing ordinary people to plan their lives in ways they cannot when the rules shift from day to day. In all, the legislative process helps ensure each of us has a stake in the laws that govern us and in the Nation’s future. For some today, the weight of those virtues is apparent. For others, it may not seem so obvious. But if history is any guide, the tables will turn and the day will come when those disappointed by today’s result will appreciate the legislative process for the bulwark of liberty it is”

My take: The Blue Owl news is retail media fear mongering. My credentials: I started and run the leading information and data provider on all things credit (@OctusCredit). I’ve been involved or have knowledge of most major bankruptcies since Enron. Companies file for bankruptcy or go insolvent for three reasons: 1) they run out of money (ie. Revlon) 2) fraud (Worldcom) 3) capital structure management (everything else) Software companies will not run out of cash. They are negative working capital businesses with negligible physical capex (software spend is capitalized albeit an analyst will adjust for that). The worst software companies will have gross retention ~ 90% and net retention 95-100%. That means the theta decay on annual recurring revenue (ARR) is single digits. Further a software company can manage expenses to further improve margins in a declining revenue environment to increase EBITDA and cash flow Fraud…I posit negligible risk. Most private credit backing software deals are the leverage in an LBO backed by a sponsor. As a CEO that has done multiple recaps with multiple sponsors, the financial diligence (QoE and beyond) is intense. Further its very hard to obfuscate financials of software companies given the cash flow nature of the business Which leads me to capital structure management. Very very few of these deals have meaningful financial covenants. Yes many will have a leverage covenant but the covenant itself is so high with so many addbacks its nearly impossible to breach outside of a cataclysmic drop in EBITDA (which Ive already explained is difficult for software cos). So nothing is bringing these companies to the table to effectuate a liability management exercise. Further, and importantly the private credit lender and sponsor relationship is a unique one. A lender wants to have a positive relationship with a sponsor so the sponsor will continue to show them their deals. The fees for doing a private credit deal are substantial and quick and being shut out of a Tier 1 or Tier 2 PE deal would be bad for business. So the private credit fund will usually work in collaboration with the private equity fund to insure steady waters (you’ve seen this with PIKing many deals the past 18 months) In addition, private credit and leverage is only a portion of the cap stack. Given the multiples over the past 5 years for SaaS companies there is a substantial amount of equity underneath the debt stack even in a unitranche. And not small equity checks. Equity checks in the billions that PE funds will do whatever they can to keep the keys to preserve their franchise and fund economics. A quick point about the gates going up at Blue Owl. For the last two years Ive been telling people private credit will have its BREIT moment. That’s not a ding on the asset class, more of a point in time when the liquid marketplace for the asset hasn’t YET developed to maturity. This has happened for effectively every major asset class in the history of finance and banking. It is not new. It is simply the growing pains a scaled asset class transcends with time. In a couple years this market will be more liquid. So in summary: 1) lots of cash flow 2) negligible risk of fraud 3) big equity cushions As I look into the market, this may be a once in a generation time to buy incredible assets that are trading at historically low multiples because of an AI narrative that throws the baby out with the bath water.

Genstar's Signant Health Taps Jefferies for Potential Sale; Auction Expected to Launch in Q2

A $10B auction for a cargo airline you’ve probably never thought about, but rely on anyway. Bain, GIP, and Stonepeak are reportedly into Round 2 for Apollo-backed Atlas Air. Barclays and Morgan Stanley are running the process. Management presentations are happening now. Check bids expected in March. Finalists in April. Atlas calls itself the world’s largest operator of Boeing 747 freighters, including the only outsourced provider of the 747-8F. Reporting: Paola Aurisicchio, Michael Haley

Just in: A group of private lenders led by Goldman Sachs is lending $3.5B to help Permira and Warburg Pincus buy Clearwater Analytics and take it private in an $8.4B deal.

The price of getting old. 🧾 Fat Brands breaks. Minivans come back. Eddie Bauer fades. Different stories. Same truth. Growing up sometimes means saying goodbye. 👋 🎧 The Octus Download 🍎: ow.ly/CWZz50Ycy4C 🟢 : ow.ly/xQ1Q50Ycy0W

When luxury retail meets cash flow reality 💸 On The Octus Download, Jason Sanjana and Kevin Eckhardt unpack the Saks bankruptcy, Detroit’s $25B EV write down, and Bugonia as the antidote to AI slop. Krishan Sutharshana breaks down how stretching vendor terms like Chanel moving from 30 days to six months can trigger a retail death spiral. 🎧 Listen now 🍎 : ow.ly/82a850Y7Hzx 🟢 : ow.ly/GgG950Y7HIH

Restructuring strategy is evolving fast. Stay updated on the latest judicial guidance. Join us + Ropes & Gray on Feb. 4 at 10am ET to explore key decisions (American Tire, Wesco & more) and their impact on deal structuring. 🔗 Register now: ow.ly/azeu50Y6AJ7

Global CLO Rankings 2025 are out! 🎥Robin Armitage on the key Q to ask about the rankings. Highlights: Golub leads US private credit; Antares, BlackRock/HPS & Apollo mid-cap trailing at ~$6bn each; Europe pipeline: ~15 potential new managers for 2026. US: ow.ly/YFWs50Y1qf0 EU: ow.ly/C1lS50Y1qcg

What's next for Venezuela's debt? 🇻🇪 Join our webinar for insights on sanctions, contracts, and potential restructuring with experts from @UoELawSchool, @RBCBlueBay & Kargman Associates. 🗓️ Jan 23, 10 a.m. ET 🔗 Register: ow.ly/ovyU50Y1shW

📈 Americas Restructuring Rankings FY’25 More activity in 2025. More concentration at the top. Full rankings here ➡️ow.ly/yOfr50Y1bmY

Apollo is making a big bet on mobile marketing analytics, leading a $2B investment into AppsFlyer alongside Fortissimo Capital and other minority investors. The structured equity deal could reshape how brands measure digital advertising performance. And PE firms are paying attention👀 📊 Paola Aurisicchio reports !!

🔮 Explore the future of liability management & restructuring in 2026: trends, macro catalysts, and sectors at risk. 📅 Tue, Jan 20 | 10:00–10:45 a.m. ET 🎙️ Panel: Gibson Dunn, Weil, Moelis 👉 Register here: ow.ly/Ikir50XY66I

Liability management shifted in 2025. Join our next webinar Tuesday, Jan 13 at 12pm ET for key trends, legal developments, and what to watch for in 2026. 🔗 Register: ow.ly/hi8Z50XTvJf

On Episode 21 of The Octus Download, we talk with Josh Sussberg of Kirkland & Ellis about first day presentations, modern bankruptcy practice, and why communication still wins. Back in the swing of things? Catch up now. 🎧 Listen 🍎 ow.ly/UEiZ50XS3Xf 🟢 ow.ly/px9350XS3Xe