Boom in Private Credit, Equity and Life Insurance Primed

Forensic accountant Tom Gober's recent sit down with Steve Eisman discussing how private equity giants like Apollo, Brookfield and KKR have taken control of millions of policyholder premiums whilst offloading billions in liabilities to "secret captives" in Bermuda and the Cayman Islands.

In 2024, private credit lenders deployed nearly $593 billion of fresh capital, up 78% from 2023. Not to find the best risk-adjusted return or preserve capital. But to deploy it. That’s how they get paid. Management, transaction fees etc.

The money is made in the doing, not on being right.

The PIK (Payment-in-kind) problem is when a borrower can’t pay you cash interest, so instead of paying you, they add the interest to the loan balance. Your loan gets bigger. You book the “income.” Everyone pretends it's fine.

In Q1 of 2025, 11% of investments valued by Lincoln International included some PIK interest. More than half of those had no PIK at underwriting — meaning the borrower was fine when they took the loan and now they’re not.

If you count those amendments as what they actually are: a borrower that would have defaulted if not for this accounting band aid, you get a “shadow default rate” closer to 6%. Triple the 2.1% headline rate that the rating agencies report.

Nearly 20% of private credit loan documents now include PIK flexibility.

This was historically a feature reserved for distressed debt. It’s now showing up in senior secured loans. BDCs, publicly traded vehicles that are retail investors’ main access point to private credit have to distribute at least 90% of their taxable income, which includes PIK income they never actually received in cash.

They’re paying dividends on income that is fiction. An IOU piece of paper stapled to another IOU pice of paper, distributed as yield to retirees who think they own something.