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

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

#321

Post by twoodfin »

elevation wrote: post #260
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…

Private equity is a huge inflation driver. I'm thrifty, and for years I enjoyed a $10/mo phone provider, ~$12.39 with taxes. I even evangelized this carrier with some young parents who were struggling to get financial traction while paying off student loans. Our affordable plan came to an end when the rates tripled! Turns out a private equity firm bought the company, jacked the rates on every customer, and sold it of…

Why did the phone provider sell to a private equity firm?

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

#323

Post by tartoran »

t0mas88 wrote: post #313
8note wrote: post #309

Earlier quoted context omitted.

why wouldnt the previous owners just open a new vet clinic, and hore all the same people back? or some manager at it? it must be easy enough to raise that starting money, if the PE firm could get the loan

An acquisition like that would have non-compete restrictions. And often the previous owners don't get 100% cash, they would receive part as shares in the new holding company.

Yeah, they thought about it well on how to shackle, extract and leave a husk behind. What about the clinic's long term success? Not in their plans, they just want to extract cash from the customers as fast as they can. I'm sure that if people organized well enough and change their mindset they'd find workarounds to these financial engineering scums.

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

#324

Post by Buttons840 »

o-o- wrote: post #247
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…

> 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 free market solution to this seems to be making it easy / easier for competitors to arise. Then, when private equity does this, the customers, and workers, just hop ship to a competitor that's better managed and the original clinic goes under.

I don't expect this happens in reality though. In general the things that happen in a healthy free market are NOT happening in our society.

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

#325

Post by Buttons840 »

gowld wrote: post #311
CapitalistCartr wrote: post #288

Earlier quoted context omitted.

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.

Then why is everyone complaining "my vet sucks now" and not "my vet went out of business"?

Because the vet does suck now, and yet is still profitable because there's not enough competition.

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

#326

Post by meetingthrower »

mbesto wrote: post #308
JumpCrisscross wrote: post #293

Earlier quoted context omitted.

> now the VC lends the money from the bank, buys the clinic, and here's the important part: _they push the debt onto the clinic's books This mostly correctly describes a leveraged buyout (LBO). LBOs are done by LBO shops, a type of private equity (PE) firm. Not VCs. (VCS do venture capital, a different type of PE.) And LBO debt isn’t “pushed” onto the company’s books, it’s never on the sponsor’s (LBO shop’s) books in…

Guy who works in the PE market here (not a PE shop myself) - this comment is correct.

Correct. One niggle in that PE can access private credit as part of the capital stack. One flavor of debt in the ice cream store.

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

#327

Post by yoyohello13 »

Buttons840 wrote: post #324
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 free market solution to this seems to be making it easy / easier for competitors to arise. Then, when private equity does this, the customers, and workers, just hop ship to a competitor that's better managed and the original clinic goes under. I don't expect this happens in reality though. In general the things that happen in a healthy free market are NOT happening in our society.

This completely discounts the work involved to find service providers you trust. I spent a long time finding a Doctor I trust, finding a Vet I trust, etc. I don't want a "free market" solution where I need to switch providers every 6 months because some rich dude is being a dick.

This is the problem with so many market focused solutions. They discount the burden put on the consumer.

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

#328

Post by infecto »

o-o- wrote: post #247
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…

> 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…

This is just wrong. VC is not PE. The Vet example is really a bad trope. For every bad deal there are many others you never hear about. PE firms are not making money by simply buying everything up. The business still has to maintain and grow.

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

#329

Post by pseudosavant »

o-o- wrote: post #247
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…

> 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…

This is exactly what happened at a SaaS company I previously worked at. It was an awesome company with ~1500 employees, turning a small profit. Private Equity comes along, buys it with ~$2B in debt. Sticks the SaaS company with a $100M+ annual interest payment. Round after round after round of layoffs ensued. Then interest rates went up... and it got even worse.

I think they are under 500 employees now. They basically laid off almost all of engineering and hired 100 new contractors in India to completely rebuild the entire platform in Node.js, as if the language it was written in was the problem. So glad to be far from that dumpster fire.

Really disappointing to see a great company gutted by some private equity people who almost certainly got their bonuses before the shit hit the fan.

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

#330

Post by CharlieDigital »

badpun wrote: post #285
CharlieDigital wrote: post #282

Earlier quoted context omitted.

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?

So do you or do you not understand how the branches of government work?

An executive's promise can only mean "I will sign the bill" because aside from executive orders, legal structures originate from the legislative.

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