"I probably shouldn't say this but when you see one cockroach, there are probably more. And so we should-everyone should be forewarned on this one,"
"A lot of the private credit actors are large, very sophisticated, very good at credit underwriting. So I don't think ... that there are necessarily lower standards there or a huge systemic problem."
"That lending follows our normal practices. It's often highly secured. And everything we do is in one way or another risky. But I'm not sure that our lending to the [non-banking financial institution] community is an area of risk that we see as more elevated than other areas of risk,"
More bankruptcies like First Brands could occur if the private credit market enters a downturn. Major banks characterize their private credit portfolios as diversified and high-grade while noting potential vulnerabilities. One large bank recorded a $170 million write-off to car-dealership Tricolor but reported no exposure to First Brands. Private credit lenders are described as large, sophisticated, and typically following normal underwriting practices with highly secured loans. Lending to non-bank financial institutions is not identified as a clearly elevated area of risk relative to other exposures. Elevated risk in private credit could materialize during an economic downturn.
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