US private credit defaults hit record 9.2% in 2025, Fitch says • Hacker News Board

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#281

Post by sharts » Thu, Mar 12, 2026, 7:36 PM UTC

fairity wrote: post #193

So, if I’m following: Banks are lending to private equity firms to fund purchases of businesses. Many of these businesses are SaaS which means their valuations are tumbling. It seems possible that valuations tumble so much that the private equity owner no longer has any incentive to operate the business, bc all future cash flows will belong to the bank. What happens in practice then? Will banks actually step in and t…

Why would banks take control? If they had that skillset or interest they wouldn't be lending to middle men to begin with.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#282

Post by CharlieDigital » Thu, Mar 12, 2026, 7:52 PM UTC

badpun wrote: post #242

CharlieDigital wrote: post #216

Earlier quoted context omitted.

We sure did when Frank-Dodd was written by the legislative and then signed into law by the executive. GP's comment is about the aftermath of 2008, entirely missing the fact that the legislative did in fact create laws which were signed by the executive and then later, in 2018, dismantled under a different administration. It's a matter of simple facts here.

Frank-Dodd wasn't nearly as strict as the post-1929 regulation (Glass-Steagall act) that actually prevented such crisies for half a century.

Sure, but is that Obama's fault? See GP

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#283

Post by resters » Thu, Mar 12, 2026, 7:54 PM UTC

Banks are following incentives that exist because of government policies, and in doing that they create significant moral hazard.

The finance industry's main innovation is rent seeking.

We all know what is going to happen, it's just a question of when.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#284

Post by edgyquant » Thu, Mar 12, 2026, 7:56 PM UTC

jaggederest wrote: post #275

koolba wrote: post #270

Earlier quoted context omitted.

> Risk free revenue to the VC. How is that risk free? If the clinic goes bankrupt the VC will be on the hook for the rest of the loan. It’s not free money.

They're not so silly as to have any personal or professional liability, they probably spin up a special purpose vehicle or llc to hold the bag if it all goes south

No bank would agree to such nonsense

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#285

Post by badpun » Thu, Mar 12, 2026, 8:00 PM UTC

CharlieDigital wrote: post #282

badpun wrote: post #242

Earlier quoted context omitted.

Frank-Dodd wasn't nearly as strict as the post-1929 regulation (Glass-Steagall act) that actually prevented such crisies for half a century.

Sure, but is that Obama's fault? See GP

If it wasn't in his power to toughen regulation, why did he promise it in his campaign?

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#286

Post by at_compile_time » Thu, Mar 12, 2026, 8:10 PM UTC

newsclues wrote: post #263

o-o- wrote: post #247

Earlier quoted context omitted.

> Banks are lending to private equity firms to fund purchases of businesses. Yes some businesses are SaaS but here's the real problem: Many businesses' sole purpose is _leveraged buy-outs_ which really is the devil in disguise. It goes like this: A VC specialising in veterinary clinics finds a nice, privately owned town clinic with regular customers and "fair" prices, approach the owners saying "we love the clinic yo…

The Mars family is doing that with the vets.

They also own a large part of the pet food industry. Given how much health is affected by diet, that's a huge conflict of interest.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#287

Post by wmf » Thu, Mar 12, 2026, 8:10 PM UTC

rd wrote: post #241

chii wrote: post #228

Earlier quoted context omitted.

It's why as a retail investor, never buy things that would otherwise have not been available to you (but was to those "elite"/institutional investors previously). Think pre-IPO buy-in. Investors in the know and other well connected institutional investors get first dibs on all of the good ones. The bad ones are pawned off to retail investors. It's no different with private credit and private equity. These sorts of de…

This can't be a to-die-on rule though. Retail would've never bought GOOG, or TSLA, or AAPL if that were the case. Maybe I'm just being pedantic.

Even for good assets there's a price you shouldn't pay. People are joking(?) about triple-layer SPVs where you can get pre-IPO exposure but at higher-than-IPO price.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#288

Post by CapitalistCartr » Thu, Mar 12, 2026, 8:10 PM UTC

koolba wrote: post #270

o-o- wrote: post #247

Earlier quoted context omitted.

> Banks are lending to private equity firms to fund purchases of businesses. Yes some businesses are SaaS but here's the real problem: Many businesses' sole purpose is _leveraged buy-outs_ which really is the devil in disguise. It goes like this: A VC specialising in veterinary clinics finds a nice, privately owned town clinic with regular customers and "fair" prices, approach the owners saying "we love the clinic yo…

> Risk free revenue to the VC. How is that risk free? If the clinic goes bankrupt the VC will be on the hook for the rest of the loan. It’s not free money.

The usual arrangement for an LBO is to saddle the bought company, the vet in this example, with the debt,or spin off a secondary company from the vet with the poorest assets and most to all of the debt. It's all a scummy business.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#289

Post by estimator7292 » Thu, Mar 12, 2026, 8:12 PM UTC

edgyquant wrote: post #284

jaggederest wrote: post #275

Earlier quoted context omitted.

They're not so silly as to have any personal or professional liability, they probably spin up a special purpose vehicle or llc to hold the bag if it all goes south

No bank would agree to such nonsense

It's called "financial engineering" and banks and courts agree to it on the daily.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#290

Post by Analemma_ » Thu, Mar 12, 2026, 8:18 PM UTC

rd wrote: post #241

chii wrote: post #228

Earlier quoted context omitted.

It's why as a retail investor, never buy things that would otherwise have not been available to you (but was to those "elite"/institutional investors previously). Think pre-IPO buy-in. Investors in the know and other well connected institutional investors get first dibs on all of the good ones. The bad ones are pawned off to retail investors. It's no different with private credit and private equity. These sorts of de…

This can't be a to-die-on rule though. Retail would've never bought GOOG, or TSLA, or AAPL if that were the case. Maybe I'm just being pedantic.

Google and Apple didn't go through ten funding rounds like today's startups do. Apple had one angel and three rounds, Google had one angel and literally just an A round after that; then retail investors could capture all the upside. Now there's way more time for private investors to pick the bones clean before it gets dumped on the public.