Some of Europe’s biggest private market companies were sold on Friday as concerns over lending standards in the US market spread across the Atlantic.
Listed in London ICG While the stock closed 5.5% lower, CVC Capital PartnersThe Jersey-based company fell about 6.6%. Swiss private market company partners group Sweden’s EQT fell 3.4%, compared with a 4.6% decline.
The move follows widespread stock losses among U.S. regional banks this week amid growing concerns that risky lending practices could spill over from private credit markets into the broader banking industry.
ICG manages more than $30 billion in private fixed income assets, representing about 25% of its total assets under management as of the end of June. Partners Group manages $38 billion in private credit, while CVC’s private credit business, which focuses on direct lending opportunities, manages approximately €17 billion ($19.9 billion).
Credit quality has come under increased scrutiny in recent weeks following the bankruptcy of US auto parts maker First Brands and the bankruptcy of subprime auto finance company Tricolor. investment bank jeffrieshad exposure to First Brands, which closed 11% lower on Thursday but rebounded on Friday.
While First Brand’s collapse was primarily due to complex borrowing arrangements in the supply chain finance and invoice receivables areas, the fiasco highlighted broader concerns over increased leverage and potentially lax credit standards.
JP Morgan CEO Jamie Dimon said there could be more potential stress within the credit system. “If you see one cockroach, there’s probably more,” Dimon said on JPMorgan’s third-quarter earnings call Wednesday. “Everyone should be forewarned about this.”
In an exclusive interview with CNBC, Joachim Nagel, president of Germany’s Bundesbank and member of the ECB’s executive board, warned this week of “spillover effects” from private credit markets, calling them “regulatory risks.”
“I’m concerned about private credit and private lending,” Nagel told CNBC’s Karen Tso on Wednesday at the IMF and World Bank annual meetings in Washington.
“This market is now very large, over $1 trillion as far as I know, and we know that there are spillover effects from less regulated market participants to more regulated market participants. As regulators, we need to take a close look at this market.”
Meanwhile, Tobias Adrian, Director of the IMF’s Department of Financial and Capital Markets, said the IMF is currently closely monitoring non-bank financial intermediaries, particularly in the private credit sector.
“This leverage is probably resilient, but of course we’re monitoring the underwriting standards very closely,” Adrian told CNBC’s Tso.
