What's Actually Going On With Private Credit

Bearish:

• $PRIVATECREDIT - Private credit faces significant risks from aggressive underwriting, potential 15% default rates, and structural issues with retail-oriented funds that could lead to forced selling and deteriorating portfolio quality.

  • “We've heard some numbers from some of the sell side Wall Street Analysts that suggest that we could see 15% defaults in private credit.”

    John·47:52

  • “If you don't invest those dollars quickly, it creates the lag on performance in the fund. The minute that dollar comes in, it's part of your NAV. Therefore, it needs to be invested rapidly in an income earning investment.”

    John·27:34

  • “Money poured in. So as that money poured in, it led to, I think, more bad actors is too strong work, but really more bad underwriting, weaker underwriting, more aggressive underwriting because they needed to get that money put to work.”

    John·28:55

  • “The assets they sell are the ones that are probably the easiest to sell, which generally are the highest quality.”

    John·38:18

  • “you are left with a fund that has raised more debt to meet some redemptions, then been forced to redeem, to sell more positions, and some of those are your better positions, so now you've got a more levered fund with poorer overall investment quality.”

    John·38:31

  • “Some of these are very highly levered companies with very few hard assets. So that's going to be the next test when we start getting it to work out of some of these loans. What do the creditors really have to protect them?”

    Craig·41:32

  • “company gets to six times levered. It's very, very difficult to get out from under that.”

    John·48:21