Blackstone's Steve Schwarzman says efforts to link credit crackups to private credit are 'misinformation'

"The recent failures of auto lender Tricolor and auto-parts manufacturer First Brands, which JPMorgan CEO Jamie Dimon dubbed "cockroaches," had the biggest names on Wall Street pointing fingers last week. Blackstone has been paying attention too, but on its third-quarter earnings call on Thursday, the company had a clear message: any attempts to tie these bankruptcies to private credit are fake news."

"Schwarzman blamed the "bank-led and bank-syndicated credits, not private credit," referencing the more than $2 billion in asset-backed securities arranged by Barclays and JPMorgan for subprime auto-lender Tricolor, and loans syndicated by Jefferies and others for auto-parts maker First Brands. And even though "we'll see some increases in defaults" because of the late-credit cycle, these bankruptcies "are widely believed to involve the fraudulent pledging of the same collateral to multiple parties," Schwarzman said."

"In other words, "this really isn't a private credit story," said Blackstone president Jon Gray, noting that the specific circumstances of these bankruptcies don't speak to credit more broadly. Gray said he doesn't see "any sort of pullback from the banks," and that "the markets have concluded that this was pretty isolated."The firm's stock price is down more than 5%, trading at $152.50 as of midmorning on Thursday."

Blackstone used its earnings call to reject links between recent auto-industry bankruptcies and the private credit market. Executives said the Tricolor and First Brands failures involved bank-led or bank-syndicated financings, including more than $2 billion of asset-backed securities and syndicated loans. The bankruptcies are believed to involve fraudulent pledging of the same collateral to multiple parties. Executives acknowledged some defaults may rise in the late-credit cycle but said these cases appear isolated and do not signal a pullback from banks. Blackstone reported its large private-credit fund focused on big companies has seen zero losses, while the firm's stock fell over 5%.

Read at Business Insider