KKR’s co-head of credit says “it’s adult swim only” in markets

Feb 20, 2026

Christopher Sheldon, co-head of credit and capital markets at KKR and author of CTRL + ALT + CREDIT, offers a concise take on today’s tricky credit backdrop. He talks about rebooting credit thinking, why scale and origination matter, how AI forces rapid re-underwriting, the importance of protective deal structures in private credit, and where pockets of opportunity may lie.

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ADVICE

Insist On Protective Private Credit Structures

In illiquid private credit, prioritise legal structure that prevents asset stripping and cash leakage.
Sheldon warns that strong documentation and protective covenants are the key differentiator when businesses face rapid change.

INSIGHT

Private Credit Is Much Bigger Than Direct Lending

Private credit now spans investment grade to below IG and includes asset-based finance, structured equity and more, not just direct lending.
Supply-demand imbalances push structure erosion in overheated pockets, while ABF and private IG often retain lender protections.

ADVICE

Make Your Own Origination

Create your own origination rather than waiting for issuance; proactively approach sponsors, bankers and portfolio companies.
Sheldon describes leveraging firm-wide resources at KKR to solve sponsor problems and secure better structures.

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The investing environment has gotten hard, says Christopher Sheldon, co-head of credit and capital markets at KKR, on the latest episode of Credit Exchange with Lisa Lee. “It’s adult swim only.”

There’s a lot of uncertainty in the market, and much of the investor community is trying to figure out what playing field they’re on, explains Sheldon. He discusses KKR’s latest investor letter, titled CTRL + ALT + CREDIT, intended to reboot how investors are approaching credit.

Sheldon contends that you have to be well-versed, have scale, and create your own origination, because elevated defaults and downgrades along with spreads tightening results in a “tough recipe”.

“The more flexibility you have, the more ways to win. The more scale and breadth and origination you have, the more ways to win,” he says.

Sheldon worries about lack of new supply in debt markets, that may cause spread tightening. He also notes the growing concern around outflows from certain markets. Right now, the private credit market is starting to see some flows come out on the wealth side, which is fine as redemptions are often capped. But if that is sustained for long periods of time, there may be a little bit more volatility in the market, he warns.

On AI, the technology is moving so quickly that there is a need to be thoughtful, be able to pivot, and re-underwrite these businesses. In the liquid market, it’s important to have the flexibility to buy or sell, and to get out of situations where that thesis might have changed. In illiquid markets like private credit, he advises to focus more attention on structures that protect from assets being stripped out, from cash leaking out of the system. “Even if you do worry that maybe it’s a little less resilient, having that structure could be the key differentiator of having ball control,” he says.

“Even if you do worry that maybe it’s a little less resilient, having that structure could be the key differentiator of having ball control,” he says.

Sheldon also reiterates that the private credit market is not just the direct lending market any longer. The bigger part of the private credit market is asset-based finance, which is financing the real world economy, whether it be consumer loans to hard assets like aircraft or commercial lending, or music intellectual property. ABF is a huge growing market and is a great diversifier to portfolios today, he reckons.

KKR credit investor letter: https://bit.ly/4aYV4pN