Episode summary
Blackstone's Michael Zawadzki on How Private Credit Got so Big | Odd Lots
Odd Lots
· · Hosts: Tracy Alloway, Joe Weisenthal · Guests: Michael Zawadzki
Summary
Michael Zawadzki argues that private credit became large because it solved real market frictions rather than because lenders simply took more risk. He compares the model to Amazon: borrowers get direct access to capital, faster execution, more customization and confidentiality, while investors capture the spread that used to go to intermediaries. He says the decisive enabler was scale, which let Blackstone finance billion-dollar-plus deals and expand from middle-market lending into a much broader “real economy” opportunity set.
He also says the asset class now looks different from its early years. Average direct lending deals are larger, less cyclical and lower leverage than 20 years ago, while investment-grade private credit tied to digital infrastructure, energy and other hard assets is now one of the fastest-growing parts of Blackstone Credit. Zawadzki cites Morgan Stanley’s estimate that $800 billion of private credit may be needed to finance digital infrastructure over the next five years, and says data-center financing works well when lenders can rely on long-dated contractual cash flows from strong counterparties.
On risks, he acknowledges more dispersion, tighter spreads in some areas and occasional defaults, but argues the bigger issue is losses, not headlines. He says private-credit documents are generally more protective than public-market structures, that Blackstone marks assets quarterly, and that future competition will favor firms with the best origination, scale and portfolio management rather than the loosest standards.
Key takeaways
- Zawadzki says private credit grew by removing intermediaries and giving borrowers speed, certainty and customization while preserving excess spread for investors.
- He argues Blackstone’s scale is what made billion-dollar-plus private credit deals possible, with 100-plus $5 billion deals done since 2021.
- He says investment-grade private credit tied to data centers, power and infrastructure is now the fastest-growing opportunity at Blackstone Credit.
- Zawadzki says private-credit documentation is more protective than public-market credit, so liability-management risk is more a public-credit problem.
- He expects more dispersion among managers, but not a broad asset-class reset, because he sees continued demand and no recession signal.
Notable quotes
“What's private credit done? It's done the same thing. It's brought the borrower right up directly to our investors capital”
“Before 2021, there were only $5 billion plus private credit deals done ever. Since 2021, 100 plus, and we at Blackstone have done most of them”
“I think that's a big part of it, right? Anytime you see a significant need for capital which we obviously see in the data center buildout”
“if I can lend against some of the best counterparties in the world against a known defined stream of cash flows”
“I think the long-term thesis for private credit is intact. By the way, you don't see massive waves of defaults outside of recessions”
How the episode opens
Bloomberg Audio Studios podcasts, radio, news. Hello and welcome to another episode of the OddLots podcast. I'm Tracy Aloway
And I'm Joe Wisenthal. Joe, I keep thinking about that Sam Alman hype cycle kind of phrase, the whole it's over and then we're so back thing. And obviously he was talking about AI and how people, you know, feel about AI, but I think you could apply it to a bunch of different markets at the moment.
So AI obviously, but also private credit. Think back to the end of last year, right? We had all the JP Morgan, Jamie Diamonds, proverbial cockroaches emerging from private credit and people started to get really worried.
Fast forward to January 2026 and a lot of those concerns seem to have faded into the background.
Right. You wrote that thing, right? Like spreads everywhere are super tight and already we know that the uh the stock market is up for the year, but credit market is off to a very strong start of all flavors from what I understand.
Right. Stock markets stealing all the spotlight. But if you look at the corporate bond market, now this is the public bond market, not private, but spreads are, you know, at basically historic heights.
I think the uh the high yield index is starting at its like tightest level ever in the history of the index for the year. This is crazy, but it also highlights an important point which is that spreads and returns are all relative. Yeah.
Right. And so if the public market is absolutely booming, that could be a good thing for private credit, but also private credit competes with the public market, right? So if you're getting pretty good returns in public credit or leverage loans, something like that, maybe you're not going into private credit as much as you used to.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private credit growth
- ai datacenter financing
- history of private credit
- blackstone credit
- future outlook for private credit
Companies and tickers mentioned
- BX
- Blackstone
Watch the episode
Watch “Blackstone's Michael Zawadzki on How Private Credit Got so Big | Odd Lots” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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