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Major Asset Managers Refute Claims of Private Credit Vulnerabilities Following First Brands Collapse
Leading alternative asset managers have strongly rejected suggestions that the failure of US auto parts supplier First Brands signals broader problems in the direct lending market, emphasizing that the company’s primary financing came from traditional bank loans rather than private credit sources.
During a House of Lords meeting on Tuesday, representatives from Blackstone, Ares, and Apollo addressed mounting concerns about potential systemic risks in private credit following the high-profile collapses of First Brands and US car dealership Tricolor. All three firms insisted they held no exposure to either company when they failed.
Daniel Leiter, senior managing director and global head of liquid credit strategies at Blackstone Credit and Insurance, told peers that First Brands’ $2 billion (£1.5 billion) balance sheet was predominantly tied to bank-originated, broadly syndicated loans.
“To be clear, the broadly syndicated loan market is used by companies that don’t turn to what’s been growing in private credit, direct lending,” Leiter explained. “The alternative would have been to go to private credit, but that did not happen. There has been a lot of misinformation on this credit issue—this was not a private credit origination.”
The clarification comes as several US banks have seen their share prices decline amid reports of exposure to the collapsed companies. The asset managers spoke cautiously about the situation, mindful that the US Department of Justice is currently conducting an inquiry into First Brands.
Tristram Leach, partner and co-head of European credit at Apollo Global Management, reinforced that First Brands was “predominantly financed in public credit markets” and noted that allegations of fraud have emerged in connection with its downfall.
“There will always be bad actors in any credit environment,” Leach stated. “The key is to fall back on rigorous credit underwriting.”
Blair Jacobson, partner and co-president at Ares Management, further emphasized that neither company’s failure indicated systemic problems within the private credit sector. He highlighted that Ares meticulously evaluates ownership structures before providing financing to businesses.
Jacobson pointed out that First Brands operates in the automotive supply sector, which is inherently cyclical and sensitive to tariff changes, while Tricolor’s business model involves selling vehicles directly to consumers.
“Neither of those companies were owned by private equity, which represents around 80–90 percent of the counterparties we lend to,” Jacobson noted. “If you looked at First Brands’ $2 billion balance sheet, perhaps only two percent sat in private credit hands.”
The discussion occurs against a backdrop of increasing scrutiny of the private credit market, which has expanded significantly in recent years as traditional banks pulled back from certain lending activities following tighter regulations after the 2008 financial crisis. Private credit funds, often managed by large alternative asset managers, have stepped in to fill this gap, providing direct loans to mid-sized companies.
This growth has prompted questions from regulators and market observers about potential risks, particularly regarding lending standards and transparency. However, the asset managers’ testimony suggests that recent high-profile failures may not be representative of broader private credit market practices.
The case highlights the complex relationship between traditional banking and alternative lending models in today’s financial ecosystem. While private credit has grown substantially, many large corporate financing arrangements still rely heavily on traditional bank lending, as evidenced by First Brands’ capital structure.
As the Department of Justice investigation continues, market participants will likely watch closely for any evidence that might contradict the asset managers’ assertions about the limited private credit exposure to these failed businesses.
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16 Comments
Interesting to see the major asset managers push back on the notion that private credit is vulnerable. They make a fair point that First Brands’ financing was primarily from traditional bank loans, not direct lending. Curious to see how this debate evolves.
Yes, it’s important to understand the nuances here. Private credit has grown rapidly, but the First Brands case doesn’t seem to be a clear-cut example of systemic risks in that market.
I appreciate the asset managers providing more context, but I remain cautious about the potential systemic risks in private credit. The industry’s rapid growth means regulators should continue scrutinizing it closely, even if First Brands isn’t a perfect case study.
Absolutely. Vigilance is needed, as the private credit market has become increasingly important to the broader financial system.
This is a complex issue without easy answers. I appreciate the asset managers providing more context, but the debate around potential risks in private credit is far from over. Regulators will likely continue to monitor the sector closely.
Absolutely. Transparency and oversight in this rapidly evolving space will be critical going forward.
The asset managers are taking a strong stance in defending the private credit industry. While the First Brands case may not be directly indicative of broader issues, it’s understandable that policymakers would be scrutinizing this fast-growing market more closely.
Agreed. Private credit has become a significant part of the financial landscape, so any high-profile failures will raise concerns that need to be carefully examined.
This seems like a classic case of industry players trying to shape the narrative. While the asset managers raise some reasonable points, I think independent experts should also weigh in on the potential systemic risks in private credit.
Agreed. It’s important to get a balanced perspective from regulators, academics, and other stakeholders, not just the private credit firms themselves.
The asset managers make valid points, but I’m still a bit skeptical. Even if First Brands’ financing wasn’t directly from private credit, the broader economic conditions that led to its downfall could still have implications for that market. More analysis is needed.
That’s a fair perspective. The asset managers have a vested interest in defending their industry, so their arguments should be scrutinized carefully.
The asset managers make a fair case that First Brands’ issues were not directly linked to private credit. However, I’m still concerned about the rapid growth and potential vulnerabilities in that market. More oversight and transparency would be prudent.
Well said. The private credit industry has expanded rapidly, and even if First Brands isn’t a clear example, that doesn’t mean there aren’t other risks that need to be addressed.
The asset managers make some valid points, but I think it’s still premature to dismiss concerns about private credit vulnerabilities. The First Brands case may not be a direct example, but it’s part of a broader trend that warrants further investigation.
Agreed. While the asset managers’ arguments are reasonable, the debate around private credit risks is far from settled. More analysis and oversight will be crucial going forward.