As the war wages on in the middle east, we turn our focus to the meltdown in private credit and, in particular, one private credit firm in Silicon Valley that seems to have been left out of the discussion.

We’ll also be paying attention to the earnings from Hewlett Packard Enterprise (HPE: NYSE) and getting ready for the big events of the following week, NVIDIA GTC in San Jose and perhaps just as momentous, the annual Optical Fiber Communications conference being held in downtown Los Angeles for the first time (reach out if you’d like to attend our cocktail party on Tuesday, March 17.)

Companies Discussed

TriplePoint’s PIK Problem

When Private Credit Meets Silicon Valley

The private credit boom has been built on a simple promise: steady income from loans too complex or illiquid for public markets. That promise is starting to fray. On March 6, BlackRock said it would limit withdrawals from its $26 billion HPS Corporate Lending Fund, capping redemptions at 5% after investors sought to pull roughly 9.3% of the fund. The decision marked the clearest example yet of gating in one of the industry’s flagship retail credit vehicles and underscored  growing tension in a $1.8 trillion asset class that has expanded faster than its liquidity.

Silicon Valley's version of private credit is called “venture debt.” Given the news flow, it’s worth taking another look at TriplePoint Venture Growth BDC Corp (TPVG: NYSE). 

TriplePoint lends money to sometimes-desperate startups at above-market rates. In the just-reported fourth quarter its average yield was 12.7%. (TriplePoint’s yields have been falling, and were as high as 15.8% just six quarters ago.)  

When the companies run into trouble and cannot make their payments TriplePoint converts those non-payments into “payment-in-kind” interest  PIK  which allows borrowers to add interest to the principal balance rather than pay cash. TriplePoint records income today. The borrower promises to pay later.

At TriplePoint Venture Growth BDC Corp (TPVG: NYSE), the public company is little more than a pool of capital; the real economic beneficiary is its external adviser, TriplePoint Advisers LLC. That advise , controlled by CEO Jim Labe and CIO Sajal Srivastava, collected $13.5 million in base management fees in 2025 – equal to about 6.3% of the firm’s market capitalization. The fee is calculated as 1.75% of gross assets, meaning it grows when the loan book expands even if the company’s stock collapses or loans deteriorate. Accepting PIK interest also expands the size of the portfolio even as asset quality deteriorates.

In a year when the firm generated $42.3 million in net investment income, management paid itself 32% of the portfolio’s cash earnings before shareholders received a penny. The structure goes further: the adviser is also entitled to 20% of investment income above a hurdle, meaning rising reported income — including non-cash payment-in-kind interest — can boost the adviser’s compensation. Because Labe and Srivastava have indirect economic interests in the adviser receiving those payments, the arrangement funnels a steady stream of fees to management even as shareholders absorb the credit risk of the underlying loans.

Non-cash PIK payments grow the portfolio’s debt even as the advisor extracts cash. It has now reached a point where PIK income accounts for most of the portfolio’s growth.

TriplePoint’s portfolio of venture-backed technology loans shows how the private credit machine can continue generating reported income even as cash flows weaken. Over the past two years, the company’s filings show cash interest from investments declining while PIK interest has climbed sharply.

What kind of startups borrow from TriplePoint? Many are promising and perform well, but these are not the OpenAIs and SpaceXs of the world. TriplePoint says 82.1% of the companies they’ve lent to in 2025  are “Clear” or “White” – meaning they require only periodic review every quarter. The company won’t say which of those companies are so trustworthy.

But their recent estimations of some credit risk are disconcerting, including:

The issue is not only liquidity. It is the nature of the income being generated inside many private credit portfolios. The loans that populate these funds are illiquid, opaque, and increasingly extended to borrowers whose ability to pay interest in cash is deteriorating. In other words, while BlackRock’s withdrawal gate highlights the liquidity tension in private credit funds, TriplePoint illustrates the credit tension beneath it. 

For TriplePoint, increasingly, the income exists on paper. The cash increasingly does not.

Tweet O’ The Week

📆 of Epistrophy Events

Availability This Week

I’ll be in our San Francisco office at the Ferry Building all week, then the travels begin — the Los Angeles Optical Fiber Communications conference will be a banger (I swear!) The stocks in this sector have been on fire in the last two years and we’ll be digging deep.

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