Apollo's Private Credit Logic Is a Lot Like Goldman

Back in 2008, executives at Goldman Sachs Group Inc. were zealots for valuing their assets at exactly the prices where they could be sold. Critics said this fervor for fair value inflamed the financial crisis, while supporters argued it helped investors and lenders at least know where they stood. A similar debate seems to be coming to private credit now that Apollo Global Management Inc. and JPMorgan Chase & Co. are leading the way in marking down the value of their loan portfolios.

Two things are certain: The strongest firms will benefit most from the pressure on funds to take hits sooner rather than later; and these moves are another sign of a likely tightening supply of private credit. Today’s weaker players — the ones without the vast resources of an Apollo or who’ve maybe lent too much to ailing software companies — are just as likely to end up as zombies.