In short: Talkington's other ~13%-yield BDC, held for the income (portfolios "money-good") while she avoids the alternative-asset-manager equities amid the private-credit redemption headlines.
Ares Capital is the other ~13%-yield BDC Talkington holds for income. Same logic as Blue Owl Technology Finance: she trusts the underlying loans ("money-good") and wants the fat dividend, while steering clear of the alternative-asset-management stocks (like Apollo) that are caught in this week's private-credit redemption scare. Owning the lender, not the manager.
In short: Used as the large-BDC contrast to PFLT — "one of the best funds," but he avoids BDC common broadly on headline risk (higher non-accruals, late-cycle mega-buyout exposure).
Full passage: premium transcript (PDF).
In short: A $29.5B BDC whose software-loan risk buckets (85%/14%/1%) Eisman distrusts: "low risk" only means the borrowers are performing now. Using ServiceNow (−60%) as a proxy, the equity beneath those loans is worth <½ original cost — "who is going to refinance the loans when the equity value is less than half? That is the key question."
Ares Capital is a "BDC" (business development company) — essentially a publicly traded fund that lends money to private companies, here $29.5B worth, heavily to software firms owned by private-equity buyers. Its manager hired a consultant who labeled 85% of those software loans "low risk." Eisman doesn't buy the comfort: "low risk" just means the borrowers are paying their bills today, which isn't the real question.
The real question is refinancing. Using ServiceNow (down 60% in a year) as a stand-in for software valuations, the equity cushion beneath these loans — the owners' stake that protects the lender — is now worth less than half what was paid. When a loan comes due, someone has to refinance it; "who is going to refinance the loans when the equity value is less than half?" That unanswered question is why he's skeptical of the whole private-credit-to-software chain.
10:56Ares hired an outside consulting firm to examine ARCC's software exposure. According to this outside consulting firm, 85% of ARCC's software loans are at low risk, 14% are at medium risk, and 1% is at high risk. The 14% and 1% problematic software loans equate to 3.3% of the entire portfolio, or 1 billion. Now, I have a problem with the way Ares categorizes these loans.
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Verbatim excerpts from the public transcripts (auto-pulled at each mention's timestamp, lightly cleaned). Timestamps link into the video; "source page" opens that commentator's full analysis at this row. Click a mention's header line to expand it (one open at a time). For personal study — not investment advice.