Founder & CIO, GoldenTree Asset Management
Hedge Fund Manager Steven Tananbaum on the State of Private Credit | WSJ
In an interview with WSJ on February 3, 2026, GoldenTree Asset Management founding partner Steven Tananbaum discusses ...
About Steve Tananbaum
Steven Tananbaum, founder and CIO of GoldenTree Asset Management, has been active in several media appearances in 2026 discussing the state of credit markets. In interviews with Bloomberg, CNBC, and iCapital, Tananbaum described the current environment as one where credit broadly lacks compelling value, though he identified select opportunities. He characterized the sell-off in software company debt as presenting a "bull case" where growing companies can be bought at a 70% discount to what private equity firms paid, balanced against a "bear case" that historical corrections in transitioning industries have further to go. Tananbaum said GoldenTree has been "nibbling" at software credits, arguing the market is not differentiating between strong and weak companies in the sector. Tananbaum described recent pressure in private credit as a "vintage issue" tied to funds from 2022-2023 rather than a systemic risk, and said he is seeing better value in private credit than in the prior 24 to 36 months. He identified structured products and security risk transfer as areas with attractive risk-reward. On the broader macro environment, Tananbaum called inflation "probably the biggest risk in the market" and noted that the financing of AI infrastructure represents an "arms race," drawing a comparison to underwater cable, which he said "was a good thing until it wasn't." He also commented on the migration of financial professionals to Florida, saying he expects it to continue to grow.
Transcript (28 segments)
✨ AI-enhanced transcript with speaker attribution
I
Interviewer0:00
Let's start with the sell-off in the markets today. What's intriguing to me is there's a sell-off in software companies and the premise, if you're a seller today, the thesis I should say is that AI is going to rapidly transform enterprises and software that seemed very valuable 2 years ago, 3 years ago, 1 year ago, all of a sudden is going to become obsolete quickly. At least the market reaction we're seeing: Salesforce down 7%, Workday 7%, all the private funds that invest and lend to this stuff, double-digit, 10% type declines. It's a huge, huge move today. What do you make of this and is this an overreaction or a proper reaction?
S
Steve Tananbaum0:44
So, first, time will tell whether it's an overreaction over the next few years. But what I do know is when you read something in the paper, my one-loss record of now is a really good time to focus on it. And you have more victories than not. So, you're reading about obsolescence, about the alternative use, that you're going to be able to code with AI today, and that it's going to make the existing software useless. When you're reading about that and the markets are behaving that way, we were talking just a couple moments ago — what's the probability that within, call it, 24 to 36 months, that most software won't be used or the growth rates are going to be significantly different or negative? I want you to start with what you think the market is pricing the probability at. What is that? So, I would say it began the year at less than 10 and now it's 20, 30. So, 20%, 30%. It may be 30%. 30% that this is going to be a very rapid transformation. Um, it's going to be — growth rates are going to go flat. And by the way, the good news is even if that's right, that doesn't mean there aren't terrific opportunities. In fact, for what we do and I've been doing this for a while, this is what we get up for. This is so exciting when there's just a broad sell-off.
I
Interviewer2:16
This is a good day for Steve.
S
Steve Tananbaum2:17
Yeah. Well, it's not that we have all the answers, but there's dispersion. And the idea that all software is the same is what's exciting. And the market is just broadly — people are overweight, particularly in private credit where it's the largest industry group or subset of an industry group, which is technology and software is well overrepresented, often at 20% plus of funds. And so there's going to be a terrific opportunity because people want to get down. And we're seeing that. There's just indiscriminate selling regardless of what the prospects are and what the barriers or the moats are for each business.
I
Interviewer2:59
So, when you — what are some of the opportunities, if you can get specific, that you're seeing out there? We've seen companies like Cloudera, which manages companies' data and data lake. Those companies have been hit — just before today actually, in the past week or 10 days. What are some of the — what do you see out there, opportunities?
S
Steve Tananbaum3:21
Sure. So, if it has a lot of customer support, doesn't lend itself to just a database screening, something like an LexisNexis opposed to a legal database — opposed to looking at having installed customer support, interaction, heavy interaction with the customer, that's good. Heavy interaction with the customer is just very hard to just pick up and move. Then there's also — is this the right decision and how quickly can we make that decision? But if you have a lot of infrastructure in place, it's hard to make a decision quickly. Whereas, if it's just a database that's a better database, that's easier.
I
Interviewer4:04
So you're talking about companies that have to make — implement this stuff. You're plugging really important software in to replace something else and you can't just yank it out immediately, right? This is complicated stuff to do.
S
Steve Tananbaum4:17
Well, also if it's cybersecurity, what is distinct, idiosyncratic opposed to a broad database. You know, and people say, well, there may be apps that can use the AI functionality. Well, they haven't been developed yet. So, they could, but then we're talking about an unknown of an unknown. So, that's one aspect of the business. The other aspect is, well, what looks like it might be challenged and how's it priced? And we're seeing that those are priced as if they really have two or three years left or three times cash flow. When you look at the way software is, it doesn't require a lot of capital, you can buy some of these senior debt instruments at three times EBITDA. And EBITDA minus CapEx is pretty much the same thing.
I
Interviewer5:11
In other words, they're going to pay their creditors more than twice over is your point here.
S
Steve Tananbaum5:17
Well, where you're buying it, because a lot of these are trading in the 50s, 60s, 70s. That you are given a pretty good head start there.
I
Interviewer5:26
Let me — let's talk more broadly about the state of private credit. It's been a hot topic today and obviously this industry has boomed. Lately there's been this debate — we all know Jamie Dimon famously reflected on the fraud and the bankruptcies at the auto-related industry companies, First Brand. Branch, Tricolor. He said, where there's one cockroach there's probably more. We heard from John Gray earlier that the private credit market is healthy. And other titans of the alt investing world have said this is all misguided to make a big deal about this. Where do you come down on it?
S
Steve Tananbaum6:07
Sure. So, there are a couple issues here. First is, is fraud pervasive? In terms of — did the companies — because people are so anxious to put out money that they didn't really look that carefully and there was a bunch of First Brand type of investments in their portfolios. I'll take the under on that. And so, could there be a percent of the market? Sure. But, is it systemic? I'd be skeptical. If you look at — was the risk priced wrong? So, I'll give you an example: a lot of high-growth companies have low credit ratings. So, you look at xAI, which might have this huge market value, which just combined with SpaceX today. It wasn't highly rated because its cash flow is developing even though it has Twitter. And it just did a deal where the debt as a percentage of the equity was 10%, 20 times. So, it looked like your loan-to-value was very attractive. That type of financing is very attractive in private credit where there's a lot of enterprise value, but not a lot of sales and EBITDA. To the extent that those valuations are wrong, private credit is vulnerable. So, that's different than a fraud. And the reason why it goes to that market is because it's not ratings-dependent. If it's ratings-dependent and it's triple-C-minus, that shows up differently in portfolios that are more liquid.
I
Interviewer7:48
So, you don't see an erosion in diligence in the hunt for yield here. Is this — you don't see something like that more widespread?
S
Steve Tananbaum7:56
Sure. So, again, a different question. Fraud is different than careless and more aggressive. There's a reason why it was priced at 50% to 100% of the spread of a high yield index. If a high yield index is 280 basis points over Treasuries, that's a different risk profile and a different reward. Yes.
I
Interviewer8:24
Let's talk about the — BlackRock recently took a 19% write-down on its BDC, a publicly traded fund that engages in private lending. The company blamed the poor performance of investments in the fourth quarter of 2025. And our own reporting was that as of November, those investments were at or around cost. So, this was a pretty rapid change that caused this markdown. I guess my question is, what do you take away from that? Is there a valuation problem or lack of transparency behind credit that investors should be —
S
Steve Tananbaum9:05
So, I would rather not talk about or discuss that specific fund and talk about pricing transparency. And I feel like that's going to be under a magnifying glass and I think correctly so. And there should be some standards that people follow. And there's also — when you go to a valuation, like an appraiser like Houlihan Lokey, you're giving them what the projections are. And there should be some sort of responsibility of whether you think those are fair projections and why. Houlihan Lokey is only responding to what you give them. And they may have opinions and ask questions back, but I think there needs to be enhanced accountability and transparency. We see throughout positions in different pricing. And there's sometimes where we can go, you know what, I understand why there is — just like in the public market, we don't think that the public pricing always would be consistent with what we think the prospects are. But in some situations where it's clear companies have missed earnings by like 50%, you know, that 95 doesn't seem like the right price. And we've seen that in some of the portfolios.
I
Interviewer10:21
Have you seen any change in behavior in the market, in your world, among credit investors as part of the fallout from say First Brands? Are people —
S
Steve Tananbaum10:34
That's a great question because we actually — we are seeing — so First Brands, and kind of an anecdote, we were actually looking at First Brands a few years ago and we asked a bunch of questions. Usually when there's a roll-up there's working capital issues, so we focused on the working capital and it didn't really add up to us. So their reaction was, you know what, we don't want to do business, and they put us on a restricted list. And it was the only restricted list that we were on because I checked. I was like, boy, I wish I knew that — I would have tried this. Too many hard questions and got blacklisted by these people? Yes. But in terms of the behavior, because it was pretty much a fraud — not pretty much, it was a fraud — the DIP that people lent to required a lot of working capital that people didn't appreciate to have ongoing operations. So the fact that accounts payable were stretched, they had to solve that to continue to operate and it turned out to be much more — it took a lot more capital. So that DIP went down, and usually DIPs are perceived to be pretty safe, went down 80% in just a couple months. So that whole market for businesses that are under pressure that had to file or declare bankruptcy, that DIP market or liability management exercises, which are out-of-court restructurings, where the super senior, which is really the DIP of those structures, have come under pressure. So, you see something like a Saks — the DIP we thought was attractive because people were concerned about working capital issues, and you look at something —
I
Interviewer12:20
Which you bought — which you're part of the bankruptcy financing, the DIP financing at Saks, correct?
S
Steve Tananbaum12:26
Yes. So, you saw a reaction there — an opportunity there that sort of corresponds to perhaps some people backing off and saying, I don't know really what's under the hood at Saks. Right. Let me leave it to Steve. He's got better analysis than me. I don't think it was about us. It was about — this isn't — was something that people were like, this isn't what we want to do. Scary. Yeah. It kind of reminded me of the AT1s or junior preferreds in banks after Credit Suisse was sold to UBS. And there was just this knee-jerk reaction where it turned out the Swiss regulator encouraged a return, even though it was a pretty small return, for the Credit Suisse equity holders and no return for the junior debt holders of Credit Suisse. Now, the Swiss regulator does not regulate most of Europe. That's the ECB. But it turned out that people extrapolated and sold off all the junior securities, and it turned out to be a terrific opportunity. I think here fraud and the extrapolation of the working capital demands is what this market has now been concerned with, and that has provided a good opportunity.
I
Interviewer13:52
We're running low on time, so I want to ask you about the Fed. Obviously it has a major bearing on your business. What happens with the new regime here? What are you expecting from —
S
Steve Tananbaum14:04
No, I think Kevin — we know Kevin well. I think he is the perfect choice. He's a very good listener. He's pragmatic. He understands markets. And I think he's a terrific choice. You know, to the extent that you also — or as we see how good somebody is once you have volatility. Whether it's, you know, for instance, the great financial crisis, 2008, and what Bernanke did and how he responded, which Kevin was a part of Bernanke's Fed. So I think his background's terrific, and I actually thought it was a great choice. I actually was quite pleased.
I
Interviewer14:51
If he follows through — if he follows the path many expect him to take, shrinking the Fed balance sheet, and it appears he's struck some dovish notes on rates, what would be the upshot for your business?
S
Steve Tananbaum15:05
I'm not so sure that it makes it a terrific buy because I think that there are some aspects of returns that are going to overwhelm what the Fed does. So, for instance, if you look at spreads now around 280, it's borderline fourth quartile of valuation. So, right now, values are pretty poor. And when you have values poor and the economy's expected to do well, over 2% returns historically have been mediocre in credit. In fact, in high yield, below investment grade, where we do most of our investing. And as a result, the estimate for us would be that you would have return lower than the coupon, call 5% area. If the economy though — it tends to slow — if it slows down, starting with this valuation and the expectations for the economy being pretty good, then watch out. Returns have been significantly negative. So, when we think of the skew of returns, it's not great and I don't think a good, talented head of the Fed, Fed chief is going to change that.
I
Interviewer16:20
But you love him.
S
Steve Tananbaum16:22
Well, you know, you always want to have somebody who you think is talented in a responsible role.
I
Interviewer16:30
Before we wrap here, I just want to ask you — you were an early — this Wall Street South migration, we'll call it, yes, you were early on that a couple years ago coming down here. Do you foresee that gaining momentum from others you talk to, particularly with the New York mayor administration? I mean, we've heard a lot about this. We haven't seen a lot of action yet, but I'm sure you're in these conversations. What do you —
S
Steve Tananbaum16:57
Sure. So, the product is a great product. I met my wife on the beach in Palm Beach 35 years ago. So, and we've had a place here for over 30 years. So, it's been a place that we're very comfortable. But seeing the growth, seeing the connectivity, seeing the engagement of people and all the events such as this, it's exciting and I'd expect it to continue to grow.