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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

#361

Post by crystal_revenge »

lumost wrote: post #120
JumpCrisscross wrote: post #94

Yeah, I'm going down a bit of a rabbit hole this morning. Turns out Wells Fargo's $59.7bn of private-credit lending is equal to 44% of its CE Tier 1 capital [1]. Meanwhile, Deutsche Bank got back to being Deutsche Bank while I was not looking [2]. [1] https://www.sec.gov/Archives/edgar/data/72971/00000729712500... [2] https://www.reuters.com/business/finance/deutsche-bank-highl...

With the current concentration of wealth and banking, it almost seems like there is an incentive for banks to ruin themselves when they end up in a little trouble. If the bank has trouble, shareholders/executives lose - if the banking system has trouble... then QE will solve the bank trouble.

That all relies on the assumption of petro-dollar, something that could have been taken for granted during the last 50 years but could easily change within weeks now.

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

#362

Post by twoodfin »

lobf wrote: post #335
twoodfin wrote: post #321

Earlier quoted context omitted.

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.

Usually companies that have a fantastic, growing business model don’t sell to PE.

I also don’t like it when a money-losing business stops giving me below-market pricing.

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

#363

Post by pocksuppet »

Aboutplants wrote: post #257
JumpCrisscross wrote: post #134

Earlier quoted context omitted.

I'm re-running some of the Fed's stress tests and, somehow, still find myself flabbergasted that DB is at the top of my risk list. Despite only having $12bn of exposure, if they see a 60% loss on that risk alone (assuming 60% recovery and 1.5x leverage), they breach their 4.5% capital requirement. That's the lowest threshold I'm finding across all of the banks the Fed stress tests. Now 50% loss means wipe out. But gi…

Time to short them?

It's never the time to short a company, even a really bad one. You have only 100% upside, infinite downside, and you have to time it perfectly. A short can be a part of a combination strategy where you go long on one company and short on a related one, but you still have to be really careful.

If DB stock increases 50% before it crashes, would you be forced to sell at the top and lose all your money?

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

#364

Post by kdheiwns »

alex43578 wrote: post #337
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…

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 consume…

Taxes coincidentally causing a 3x price change right when private equity buys a company is quite unlikely. Especially since I doubt every other company has tripled their prices.

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

#365

Post by Rury »

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…

Yes, instead of banks lending sub prime mortgages directly, it's as if they are lending to private equity groups who are then lending rather undiscerningly. Within the last week, we now have Blackstone, Blackrock, Owl, and Morgan Stanely limiting withdrawals on private credit funds. Not a good look...

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

#366

Post by ehnto »

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…

I think the free market response is that another vet with fair prices will show up, but A) that's a waste of everyones time and very inefficient and B) a real grass roots business takes time and passion, somebody to start it, buy in from the community etc.

That work had already been done. To throw it all away for VC or PE to squeeze the life out of it and by extension the community, that's just sad, and a net negative for society. I don't really care about who to blame, the PE or the business owner who sold, the process is destructive.

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

#367

Post by Terr_ »

matheusmoreira wrote: post #352
skeeter2020 wrote: post #340

Earlier quoted context omitted.

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…

It's the destructiveness that gets me. It's a perfectly good company, employees are happy, consumers are happy, profit is being made, it's sustaining itself... Then they come and just literally destroy all that. This can't be good for society. I wonder why it's just not criminalized somehow.

> It's a perfectly good company [...] I wonder why it's just not criminalized somehow.

Not-an-expert here, but I think part of the problem is that it's hard to draw a nice legally-enforceable line that would distinguish when it's a "perfectly good" company versus one crying out for intervention.

For example, suppose a company is floundering because of executive mismanagement, outrageous compensation to the C-suite, etc. In that case, someone could LBO in, fix things up, and then sell the revitalized thing later and make a modest profit while improving the world.

It's... less likely, but they could.

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

#368

Post by kortilla »

crystal_revenge wrote: post #361
lumost wrote: post #120

Earlier quoted context omitted.

With the current concentration of wealth and banking, it almost seems like there is an incentive for banks to ruin themselves when they end up in a little trouble. If the bank has trouble, shareholders/executives lose - if the banking system has trouble... then QE will solve the bank trouble.

That all relies on the assumption of petro-dollar, something that could have been taken for granted during the last 50 years but could easily change within weeks now.

No it doesn’t, the petro-dollar isn’t a real thing. Forcing USD denomination for a transaction doesn’t help USD because there is a buyer of USD and an equally sized seller of USD.

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

#369

Post by ambicapter »

ehnto wrote: post #366
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…

I think the free market response is that another vet with fair prices will show up, but A) that's a waste of everyones time and very inefficient and B) a real grass roots business takes time and passion, somebody to start it, buy in from the community etc. That work had already been done. To throw it all away for VC or PE to squeeze the life out of it and by extension the community, that's just sad, and a net negativ…

There's only one way to combat this, which is to make it unprofitable.

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

#370

Post by ambicapter »

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.

Free markets are a fiction, the real world contains a lot of friction.
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