Almost a year ago, US companies First Brands and Tricolor filed for bankruptcy, involving alleged fraud by obscure firms, raising alarms about the interconnected private lending web that grew in recent years. Investors, CEOs and policymakers warned of corporate debt stress, suggesting the episode might be a canary in the coal mine for the roughly $2tn private credit industry, one of the fastest‑growing debt markets. JPMorgan Chase CEO Jamie Dimon once said “when you see one cockroach, there are probably more”.\n\nThe Bank of England started exploring potential cracks and systemic impact of a serious shock to private credit.

A year later, many apocalyptic predictions have not materialised, but late‑summer 2025 was not a blip; concerns about private credit, especially direct lending, persist. Portfolios have seen markdowns, outflows and defaults, while investment‑grade asset‑backed lending appears resilient. The value of troubled loans held by large private debt investors has reached levels last seen in 2017.\n\nSome on Wall Street dismiss concerns as hype, yet pockets of instability are real, and even private lenders acknowledge cyclical dynamics.

Private lending expanded when rates were low and equity markets surged, as private equity firms used credit arms of their private capital cousins, raising risk‑concentration worries. Circular ownership can amplify risk, and a fashion has emerged for private capital firms to buy or set up life assurance companies, routing policyholder premiums into private credit. A federal investigation into pioneer Mark Walter’s structure has heightened worries about mismanagement.

Unlike banks, US insurers are mainly overseen by state regulators.\n\nAppetite for some private credit assets is slowing; Blue Owl Capital’s flagship arm reported its slowest fundraising pace in three years this summer after heavy withdrawal requests, and Ares Management cut a billion‑dollar continuation vehicle by more than half when investors pushed back on valuations. A global “bond glut” has pushed rates up, contributing to a bond sell‑off. The recent stress signals should warn investors and regulators to increase vigilance.