The problem with private credit is that most of the valuations are not publicly tested.

what do I mean by that? oracle is publicly traded, which means they (should) report profit loss and other key metrics in a standardised way. This means that one company's metrics should be comparable to others. Their value is assessed by the second on a public market. This means that anything that affects thier value (real or imagined) is reflected almost instantly. (same goes for debt)

Private credit, and the stuff its invested in, is much murkier. THey do not have the same public reporting rules. There is no testing of value. Its in the interest of the owner of that debt to talk up the value of the assets they hold.

This means that a fund might invest in 10 companies. Those companies might be doing well, or they might not. Because information is limited, and there are no public trades, the value of those companies are only ever tested at sale, or in a crisis. (ie they fold, or do something so public that they can't avoid the consequences.)

THe problem then is that because information is limited (was it a one off, did the owner hide the problem, did they use the wrong investment strategey, is the rest of the portfolio also over valued by 10x?) causes people to panic, and withdraw money.

Because private credit is not that liquid, it means that if people withdraw too much money, they either have to say "no we have no free cash" (lehman brothers insolvancy), they have to take out bridging loans (expensive and very short term) or sell assets (fire sales rarely get good value and shrink the credit supply)

All of which causes a panic, and people look at places like softbank, see the leverage and think "oh fuck thats not worth anything" and the bubble pops.

Yep i'd say your comment fully agrees with me.

TLDR;

Modern finance is basically a collaborative fiction. Its fine so long as everyone buys into the same narrative. As soon as someone says "no, why?" the whole thing falls of the rails.