Royce Stone Capital CEO Warns of 'Cracks' in $3 Trillion Private Credit Market; Urges Shift to Direct Asset-Backed Models

MELBOURNE, Australia, Feb. 13, 2026 /PRNewswire/ -- As the global private credit market continues to expand beyond an estimated $3 trillion, structural changes within the sector have become more visible, including broader use of payment-in-kind (PIK) interest and evolving lending practices. Tarek Omar, CEO & Partner at Royce Stone Capital, outlined the firm's views on these developments and described the lending structures it utilizes in its own operations.

Mr. Omar's comments reflect Royce Stone Capital's assessment of current market characteristics. Data indicate a rise in payment-in-kind (PIK) interest, a mechanism that allows borrowers to defer cash payments by capitalizing interest into the loan balance. Usage has increased to 10.6% of transactions, up from 7% in 2021.

"The private credit market has grown rapidly over a relatively short period," said Tarek Omar. "As the sector evolves, we are observing a wider range of structures and risk profiles. At Royce Stone Capital, we focus on maintaining clarity around security, documentation, and investor positioning within each transaction we undertake."

Observations on Market Structure

Royce Stone Capital notes that industry participants, including credit rating agencies such as Moody's, have publicly commented on the increasing complexity of certain financing structures. Within this environment, the firm monitors several structural characteristics when assessing transactions, including:

• Increased use of PIK interest, which alters cash-flow dynamics within loan structures.
• The presence of pooled investment vehicles with layered capital structures.
• Whether lending arrangements provide direct security over underlying assets or indirect exposure through fund equity.

Royce Stone Capital operates a direct lending model focused on asset-backed transactions. Unlike commingled fund structures, the firm structures transactions where lending is secured by first or second mortgages over specific assets, typically at conservative loan-to-value ratios.

"Our model is designed so that investors participate in transactions with clearly defined security positions," Omar said. "Royce Stone Capital does not take custody of investor funds. Capital remains under the control of the investor or their appointed legal representatives until a transaction is completed."

Company Focus

Royce Stone Capital continues to concentrate on identifying lending opportunities where contractual terms, asset security, and documentation are clearly defined. The firm's approach emphasizes interest generated through contractual obligations rather than reliance on projected or target outcomes.

About Royce Stone Capital

Royce Stone Capital is a private credit and investment firm specializing in direct lending opportunities. The firm focuses on bridging the gap between investors seeking secured returns and borrowers requiring efficient capital solutions. By utilizing a direct mortgage security model, Royce Stone Capital prioritizes transparency, asset security, and risk mitigation.

For more information, please visit https://www.roycestonecapital.com.au/.

Media Contact:
Tarek Omar
CEO & Partner
[email protected] 
+61 477 363 612

Disclaimer

This press release is intended solely for informational purposes and describes the business activities and perspectives of Royce Stone Capital only. It is not to be construed as financial advice, an offer to sell, or a solicitation of an offer to buy any securities. Investors are advised to independently verify information before executing any investment decisions.

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SOURCE Royce Stone Capital