Europe’s private equity giants tumble as U.S. bank lending fears spread
Some of Europe’s leading private-market companies sold on Friday as concerns about credit standards in U.S. markets swept across the Atlantic.
Listed in London ICG fell about 6 percent CVC Capital PartnersThe company, headquartered in Jersey, was down about 5.4% in the afternoon. Swiss private market firm Partners Group It fell 4% while Sweden’s EQT fell 4%.
The moves follow a widespread sell-off among US regional banks this week as fears grow about risky lending practices spreading from the private lending market to broader banking.
ICG manages more than $30 billion in private debt assets; this manages about 25% of its total assets as of the end of June. Partners Group manages $38 billion of private credit, and CVC’s private credit business, which focuses on direct lending opportunities, manages about 17 billion euros ($19.9 billion).
Credit quality has come into greater focus in recent weeks following the collapse of US auto parts maker First Brands and the collapse of subprime auto lender Tricolor. investment bank jefferiesShares with exposure to First Brands fell 11% on Thursday before rebounding on Friday.
While First Brands’ collapse was primarily due to complex borrowing arrangements in supply chain finance and invoice receivables, the debacle has highlighted broader concerns about rising leverage and potentially lax credit standards.
JP Morgan CEO Jamie Dimon said more potential stress could be lurking in the credit system. “When you see one cockroach, there’s probably more,” Dimon said during JP Morgan’s third-quarter earnings call on Wednesday. “Everyone should be warned about this in advance.”
Joachim Nagel, president of the German Bundesbank and member of the ECB’s governing council, warned this week of “spillover” from the private credit market, calling it a “regulatory risk” in an exclusive interview with CNBC.
“I worry when it comes to private credit and private loans,” Nagel told CNBC’s Karen Tso at the IMF and World Bank annual meetings in Washington on Wednesday.
“This market is really huge right now, over $1 trillion to my knowledge, and we know there is some spillover from less regulated market participants to more regulated market participants. We, as regulators, have to look at that closely.”
Meanwhile, Tobias Adrian, Director of the IMF’s Monetary and Capital Markets Department, said that the group is now monitoring non-bank financial intermediaries more closely, especially in the field of private credit.
“That leverage is probably durable, but of course we monitor underwriting standards very closely,” Adrian told CNBC’s Tso.
