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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

#331

Post by rootusrootus »

yoyohello13 wrote: post #327
Buttons840 wrote: post #324

Earlier quoted context omitted.

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.

If the market is healthy, there will already be two or three providers in town instead of one that has any sort of monopoly, and the LBO won't be lucrative to begin with.

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

#332

Post by [deleted] »

codethief wrote: post #317
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…

> And LBO debt isn’t “pushed” onto the company’s books, it’s never on the sponsor’s (LBO shop’s) books in the first place to any material extent. Doesn't the LBO shop still need to pay off the debt, technically speaking? AFAIU the company's assets (hospital in OP's example) are used as collateral in a credit agreement between the LBO shop (as the hospital's new shareholder) and the bank. But unless I'm mistaken, this…

[deleted]

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

#333

Post by ineedasername »

Last year Jamie Dimon said there were some going to be some “cockroaches” found lingering unattended to in lots of private credit portfolios— the implication at the time was not that it was systemic and deep, merely that various incentives and market forces have meant a shakeout of either the incremental as-it-happens variety or slightly larger ones of multiple happening at a time.

Since then I’ve seen small things indicating lots of people quietly checking their books for such.

In the last week or two this has accelerated. A lot. Every few days there are ratchets tightening things up. Dimon just put some hard limits on some private credit lines and what they could take out. A few other banks trying to take other precautions.

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

#335

Post by lobf »

twoodfin wrote: post #321
elevation wrote: post #260

Earlier quoted context omitted.

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?

for the money presumably? This questions feels like you're actually making a cryptic statement but I don't understand what it is.

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

#336

Post by smallmancontrov »

ineedasername wrote: post #333

Last year Jamie Dimon said there were some going to be some “cockroaches” found lingering unattended to in lots of private credit portfolios— the implication at the time was not that it was systemic and deep, merely that various incentives and market forces have meant a shakeout of either the incremental as-it-happens variety or slightly larger ones of multiple happening at a time. Since then I’ve seen small things i…

> the implication at the time was not that it was systemic and deep

How is that what you took away from this?

> When you see one cockroach, there are probably more… Everyone should be forewarned on this. -Jamie Dimon

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

#337

Post by alex43578 »

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…

It’s not private equity’s fault, it’s the continued imposition of increasing taxes and government-mandated fees:

“The wireless market has become increasingly competitive. The result has been steady declines in the average price for wireless services. Over the last decade, the average monthly revenue per wireless line has fallen from $47.00 per month to $34.56 per month. Unfortunately, this price reduction for consumers has been partially offset by higher taxes.” - Tax Foundation (2023)

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

#338

Post by paganel »

JumpCrisscross wrote: post #194
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 Not quite. Private credit is to debt what private equity is to equity. (Technically, any non-bank originated debt that isn't publicly traded is private credit. Conventionally, it's restricted to corporate borrowers.) So bank exposure to private credit generally means banks lending to non-banks who then lend to corporate borrowers.

> So bank exposure to private credit generally means banks lending to non-banks who then lend to corporate borrowers.

Isn't this similar in spirit to the infamous (according to Western media) Chinese shadow banking market? There are articles [1] more than 10 years old talking about the collapse of China because of that practice, but it looks like the US is all too happy to do a very similar thing. I also wonder how big of a market we're talking here, as I was too lazy to check. A few hundred billions? $1 trillion? $2 trillion? More?

[1] https://www.cnbc.com/2014/12/03/china-shadow-bank-collapse-e...

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

#339

Post by paganel »

harmmonica wrote: post #267
vondur wrote: post #225

Earlier quoted context omitted.

Am I wrong thinking this is similar to the housing loan crisis of 2008? This is just another form of that "shadow banking" system isn't it?

I don't think you're wrong if the following holds true: Before the housing bubble burst, banks lent funds to countless borrowers who couldn't, ultimately, afford their mortgage payments (because the banks didn't do their due diligence when underwriting the loans). This was widespread across pretty much every bank and mortgage banker. Not sure of the actual percentage of borrowers who, when all was said and done, had…

Even the best due diligence can't do anything if a crisis (not necessarily banking-related, a Middle East might just do the trick) starts manifesting itself and now many of those businesses have issues in paying down the debt they owe.

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

#340

Post by skeeter2020 »

pseudosavant wrote: post #329
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…

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 basicall…

This was driven home to me at SaaS company with > $80M ARR when the new CEO was parachuted in by the PE owner said in an all-hands "and we're close to cashflow positive when we account for our interest payments..." How can a software company generating this much subscription revenue NOT be making money? When it's servicing the > $500M the PE firm used to buy it. The rest of the playbook was boringly predictable: cut costs, sign multi-year enterprise deals, sell before the current fund's horizon and hope the music doesn't end.

As a result I prefer the naked greed of VCs where everybody - VC, owners, employees - knows the plan is IPO because at least it's transparent compared to the dirty lies a lot of PE pushes.

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