Apollo caps withdrawals as Moody’s cuts FSK to junk

Apollo Global Management limited investor withdrawals to 5% at Apollo Debt Solutions after redemption requests reached about 11.2%, according to a shareholder letter. The cap applies to a share of outstanding stock in the non-traded private credit fund.

Other large managers have imposed similar limits. In early March, BlackRock set a 5% cap on withdrawals at the $26 billion HPS Corporate Lending Fund after requests equaled 9.3% of net asset value. Blue Owl Capital ended quarterly redemptions at Blue Owl Capital Corp II and replaced them with periodic distributions funded by asset sales.

Private credit funds pool money from investors to make loans that are not easily sold on short notice. Many of these funds offer limited redemption windows. Caps and gates restrict how much cash can be taken out in a period to keep withdrawals aligned with the liquidity of the underlying loans.

Withdrawal pressure has risen as investors question lenders’ exposure to software companies, where changing business models and spending tied to artificial intelligence have weighed on performance. Large banks have responded to client interest in hedging; Goldman Sachs and JPMorgan have offered hedge fund clients ways to short the private credit market.

Separately, Moody’s downgraded FS KKR Capital Corp. to Ba1 from Baa3, moving the business development company below investment grade.

The rating agency wrote:

“The downgrade reflects FSK’s continued asset quality challenges, which have resulted in weaker profitability and greater net asset value erosion over time relative to business development company (BDC) peers.”

Moody’s cited leverage at the high end of FSK’s peer group and a portfolio that is less senior in the capital structure than peers, alongside a growing reliance on secured debt. On funding, the report noted that FSK has sufficient liquidity, including available revolver capacity and well-laddered unsecured maturities. FS KKR Capital is jointly managed by KKR affiliates and FS Investments.

The actions at Apollo, BlackRock and Blue Owl arrive amid broader scrutiny of private credit, a market of roughly $1.8 trillion. Fund managers have adjusted withdrawal policies and cash distribution plans while working to match investor redemption requests with asset sales and portfolio cash flows.