Welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Friday, March 13. In today's briefing, Cliffwater and a Morgan Stanley private-credit fund are the latest private-market players to cap withdrawals in the face of surging redemption requests—a double blow threatening the retail growth model underpinning Wall Street’s private-debt expansion.

The private-credit engine that powered massive growth on Wall Street is sputtering, with investors trying to pull money out of big funds, forcing firms into uncomfortable decisions and endangering their future profits.

The latest example came Wednesday when Cliffwater told clients that investors in its largest fund asked to cash out 14% of their money this quarter. The $33 billion fund will pay out about 50% of the redemption requests, meaning that the other half will need to wait at least another quarter to exit.

A Morgan Stanley private credit fund is among the latest to say it won’t give back all the money to investors wanting out.

The bank’s North Haven private-income fund told investors Wednesday it received quarterly requests making up around 10.9% of the fund’s $7.6 billion in assets, but would stick to a 5% limit. The fund, which is structured as a non-tradable business development company, runs a tender offer every quarter.

Many private credit funds have been barring the door for their clients. They had better hope their bankers don’t turn off the taps, too.

Funds that make loans to companies are also themselves borrowers, often from banks. In good times, funds like nontraded business-development companies use borrowing to boost their returns.

When times are tough, they can borrow even more, in part to ensure they have enough cash to redeem investors who want out. That can be a better option than having to sell loans, possibly at firesale prices.

Houston bankruptcy Judge Christopher Lopez ruled Thursday that auto-parts supplier First Brands must set aside $25.7 million in a separate account before he rules on which lenders lay claim over those assets.

Evolution Credit Partners, which provided off-balance-sheet financing to First Brands, has sought to keep separate the funds it says it is owed by the company from First Brands’ general accounts. Evolution said in February that it has a first priority claim on certain receivables paid to First Brands before it filed for chapter 11 last year.

Judge Lopez will rule on whether Evolution or First Brands’ other lenders are first in line to be repaid at a later date.

On Thursday, Evolution separately asked that certain First Brands special purpose vehicles, including the company’s brake parts business, have their cases converted to chapter 7. First Brands previously announced that Brake Parts will shut down.

–Alicia McElhaney

Honda Motor expects to book up to $15.7 billion in expenses and losses related to the reassessment of its electric-vehicle strategy, and expects to swing to its first annual loss in decades as a result.

Expenses and losses related to the re-evaluation could total as much as 2.500 trillion yen for the fiscal year ending March 31 and in the coming years, the Japanese automaker said Thursday, after its global rivals gave gloomy outlooks in recent months.

Law firm Akin Gump has named partner Ryan Cox as co-head of its Global Capital Solutions group, alongside Dan Fisher and Prakash Mehta.

Cox, who has led the firm’s hybrid capital practice since 2024, advises asset managers on structured equity financings and bespoke capital solutions across the capital structure, including transactions tied to mergers and acquisitions, sponsor liquidity, recapitalizations and special situations. His work spans technology, energy and infrastructure, health care and financial services sectors.

Akin’s push into capital-solutions work comes as private markets investors increasingly deploy hybrid debt-and-equity structures to finance deals. Its Capital Solutions group, launched in 2024, now includes more than 120 lawyers globally and advises asset managers across strategies including hybrid capital, preferred equity and private credit.

Skadden Arps Slate Meagher & Flom has hired finance lawyer Scott Heard to lead its private credit practice in New York and brought back restructuring attorney Matthew Murphy in Chicago, strengthening the firm’s capabilities in private credit markets and corporate workouts.

Heard joins the firm’s Finance Group advising private credit lenders and financial institutions on transactions including acquisition financings, asset-backed and cash-flow loans, as well as special-situations financings.

Murphy returns to Skadden’s Corporate Restructuring Group, where he will counsel distressed companies, creditors, hedge funds and asset managers on out-of-court restructurings and chapter 11. His work also includes distressed acquisitions, post-petition financing and liability management exercises.

Share your tips, suggestions and feedback with the WSJ Pro Bankruptcy team: Alexander Gladstone; Jodi Xu Klein; Akiko Matsuda; Alicia McElhaney; Andrew Scurria; Becky Yerak. 

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