Key Takeaways
- • Mayer Brown's legal update warns that stress in the U.S. private credit market is generating litigation risk, with non-traded BDC redemption requests exceeding the standard 5% quarterly limit and several major firms having capped redemptions.
- • Publicly traded BDCs are down roughly 16% over the past year, with some declining as much as 50% and trading at a roughly 20% discount to reported NAV, per the article.
- • Mayer Brown identifies five claim categories: securities class actions under Section 10(b) and Rule 10b-5, redemption-related contract and fiduciary disputes, manager fiduciary and valuation claims, accessorial liability against service providers, and borrower-insolvency and inter-creditor litigation.
- • Valuation practices are an enforcement flashpoint: former SEC Chair Jay Clayton, now U.S. Attorney for the Southern District of New York, warned that "sketchy marks" have drawn prosecutorial attention, and the SEC settled with an adviser over loans sold at par without fair value reassessment for a $900,000 penalty in early 2026.
- • BDC total assets reached $438 billion at year-end 2024, and U.S. private credit has grown from roughly $41 billion in 2000 to an estimated $1-2 trillion today.
Summary
Private credit in the United States has expanded from roughly $41 billion in 2000 to an estimated $1-2 trillion today, according to Mayer Brown, which cites projections of global growth to $5 trillion by 2029. Business development companies, whose total assets reached $438 billion by year-end 2024, have broadened retail participation in the asset class, and funds now compete directly with traditional bank syndications.
Mayer Brown states that recent market stress is already generating litigation. Redemption requests at non-traded BDCs are exceeding the standard 5% quarterly limits, and several major firms have capped redemptions. Publicly traded BDCs are down approximately 16% over the past year, with some falling as much as 50% and trading at a roughly 20% discount to reported NAV. The firm notes the current period may reflect recalibration rather than crisis, but argues stakeholders should assess and mitigate litigation exposure now.
The article outlines several claim categories. Securities class actions under Section 10(b), Section 20(a) and Rule 10b-5 allege misstatements about liquidity, NAV and portfolio health, with complaints filed in the Southern District of New York, Central District of California and Northern District of California. Redemption disputes may involve claims that funds selling illiquid loans at steep discounts harmed non-redeeming investors, as well as fiduciary duty and fair-dealing claims alleging preferential redemption treatment. Mayer Brown cites an April 2026 derivative suit by a shareholder of a publicly traded BDC against its investment adviser over portfolio management amid redemption pressure.
Valuation is identified as a particular flashpoint, since management fees based on NAV may incentivize managers to maintain marks as loans deteriorate. Citing Bloomberg reporting from November 25, 2025, Mayer Brown notes that Jay Clayton, now U.S. Attorney for the Southern District of New York, warned that "sketchy marks" have drawn prosecutorial attention. Service providers including valuation agents, auditors, fund administrators and credit rating agencies also face potential accessorial liability. The article notes that in early 2026 the SEC settled with an adviser that sold performing loans at par during market dislocation without reassessing fair market value, resulting in a $900,000 penalty.
Finally, borrower-insolvency claims, including fraudulent transfer litigation tied to liability management exercises and inter-creditor disputes over non-pro-rata transactions, are becoming more routine as lender groups grow. Mayer Brown recommends accurate disclosures, rigorous due diligence, ongoing borrower monitoring, documented valuation procedures and precise credit agreement drafting to reduce exposure.
Mayer Brown states that recent market stress is already generating litigation. Redemption requests at non-traded BDCs are exceeding the standard 5% quarterly limits, and several major firms have capped redemptions. Publicly traded BDCs are down approximately 16% over the past year, with some falling as much as 50% and trading at a roughly 20% discount to reported NAV. The firm notes the current period may reflect recalibration rather than crisis, but argues stakeholders should assess and mitigate litigation exposure now.
The article outlines several claim categories. Securities class actions under Section 10(b), Section 20(a) and Rule 10b-5 allege misstatements about liquidity, NAV and portfolio health, with complaints filed in the Southern District of New York, Central District of California and Northern District of California. Redemption disputes may involve claims that funds selling illiquid loans at steep discounts harmed non-redeeming investors, as well as fiduciary duty and fair-dealing claims alleging preferential redemption treatment. Mayer Brown cites an April 2026 derivative suit by a shareholder of a publicly traded BDC against its investment adviser over portfolio management amid redemption pressure.
Valuation is identified as a particular flashpoint, since management fees based on NAV may incentivize managers to maintain marks as loans deteriorate. Citing Bloomberg reporting from November 25, 2025, Mayer Brown notes that Jay Clayton, now U.S. Attorney for the Southern District of New York, warned that "sketchy marks" have drawn prosecutorial attention. Service providers including valuation agents, auditors, fund administrators and credit rating agencies also face potential accessorial liability. The article notes that in early 2026 the SEC settled with an adviser that sold performing loans at par during market dislocation without reassessing fair market value, resulting in a $900,000 penalty.
Finally, borrower-insolvency claims, including fraudulent transfer litigation tied to liability management exercises and inter-creditor disputes over non-pro-rata transactions, are becoming more routine as lender groups grow. Mayer Brown recommends accurate disclosures, rigorous due diligence, ongoing borrower monitoring, documented valuation procedures and precise credit agreement drafting to reduce exposure.
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