"On October 15, two Wall Street titans offered radically different visions of the private credit market. JPMorgan Chase CEO Jamie Dimon warned investors that recent bankruptcies in private credit could be just the beginning: "When you see one cockroach, there are probably more." Hours later, BlackRock CEO Larry Fink struck a defiant tone on his firm's earnings call, "I've never been more excited about the future of BlackRock," he said. BlackRock has bet $12 billion on private credit through its acquisition of HPS Investment Partners:"
"Investors have been so worried about the stability of private credit recently that their frantic selling drove up the VIX "fear" index by 35% over the last month. They are spooked by the collapse in September of Tricolor Holdings, a subprime auto lender and dealer, revealing allegations of fraud in which the company allegedly pledged the same collateral to multiple banks. Private credit was dealt another blow late last month when First Brands, an auto parts supplier, collapsed into bankruptcy owing $10 billion."
Two divergent outlooks emerged as JPMorgan warned that recent private credit bankruptcies may indicate broader trouble while BlackRock reiterated strong conviction after a $12 billion private credit bet. Investor selling drove the VIX higher by 35% in a month amid the collapse of Tricolor Holdings and the bankruptcy of First Brands, both tied to alleged fraud and missing funds. Regional bank disclosures of fraud-related losses sparked a market rout that erased roughly $100 billion in U.S. bank market capitalization and pushed volatility to four-month highs. Reported institutional losses included $170 million at JPMorgan, over $500 million at UBS, and $715 million at Jefferies. The private credit market has expanded from about $200 billion to $3 trillion globally in fifteen years. Some credit analysts and executives view these incidents as traditional bank lending failures rather than systemic private credit problems.
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