Hacker News new | past | comments | ask | show | jobs | submit
RobRivera | on: US private credit defaults hit record 9.2% in 2025, Fitch says
What kind of trouble is brewing from the migration of partner capital committment to credit based on NAV?

What is the risk, probability of actualizing the risk, and the outcome of actualized risk?

The ticktock ticktock routine reads like baseless fearmongering to me.

cs702 | parent
My understanding is that many private credit funds have been very lax about conducting basic due diligence on the creditworthiness of borrowers.

For example, take First Brands, a multi-billion-dollar company which filed for bankruptcy last year. First Brands had pledged the same assets as collateral for loans from multiple private-credit funds. Those loans were being carried at a fantasy NAV of 100 cents per dollar, until suddenly they were not. Did none of these lenders submit UCC filings so other lenders could check which assets had already been pledged as collateral? Did none of these lenders ever check to see which assets had already been pledged? Did all these lenders make loans based on blind trust?

Failing to check and verify that assets have not been pledged as collateral to other lenders is an amateur mistake. It's reckless, really. The equivalent in home-mortgage lending would for a mortgage lender never even bothering to check that a homeowner isn't getting multiple first-lien mortgages simultaneously on the same home, then forgetting to put the first lien on the property title.

My take is that for many private credit funds, NAVs are basically fantasy.

vmbm | root | parent | next
Do you know if First Brand's actions are considered fraud? Or was this entirely on the lenders to make sure they were in the clear regarding the collateral? Doesn't excuse the lack of diligence, but curious if there was some assumption of good faith that may have played a role in what diligence was or was not done.
cs702 | root | parent
Only a court can decide if the actions are fraud, but they sure look like it to me. Fraud doesn't excuse the lack of due diligence.
RobRivera | root | parent | next
If lenders are in fact not performing due diligence and passing off good credit as bad...sounds suspiciously like a 2008-like era where noone cared about the credit worthiness but just wanted to generate lines of credit.

Oh boy, if this is the case, oh boy.

Lessons not learned indeed.

bombcar | root | parent
Once you get outside of things that are highly standardized (like home loans to individuals) you quickly find out that no matter how regulated, finance is done on a handshake.
cs702 | root | parent
That's true, but only to a point. Due diligence is not uncommon, especially with more traditional forms of credit.

I resorted to the mortgage-lending analogy so others could quickly grok what multi-pledging means.