JP Morgan's Jamie Dimon recently issued a warning following a series of corporate bankruptcies, suggesting that such events may signal deeper issues.

JP Morgan's Jamie Dimon recently issued a warning following a series of corporate bankruptcies, suggesting that such events may signal deeper issues. While Dimon's comments were not aimed specifically at the private credit industry, they have put private credit executives on the defensive, especially after JP Morgan reported significant charge-offs related to subprime auto lender Tricolor.

Industry leaders, such as Blue Owl's Mark Lipschultz, have responded by emphasizing the overall health of their portfolios and downplaying the idea that one bankruptcy indicates widespread problems. Despite this, stocks of private credit firms fell sharply after the Tricolor bankruptcy, reflecting investor anxiety, though they have since rebounded. The episode underscores the sensitivity of private credit markets amid their rapid expansion.

Private credit under pressure: Here's what to know

JP Morgan's Jamie Dimon sending a warning this week after some recent corporate bankruptcies saying when you see one cockroach, you'll probably soon see more. Those comments now have private credit executives on the defensive. Leslie Picker joins us now with more on that. Good morning. Hey, good morning, Andrew. Yeah, Dimon wasn't directly criticizing the private credit industry with his cockroach comments. He acknowledged that JP Morgan isn't omnipotent after $170 million worth of charge-offs for its exposure to subprime auto lender Tricolor. But when Blue Owl's Mark Lipschultz was asked about Dimon's warning, he took the opportunity to respond. There will always be bankruptcies. There are thousands of credits in the marketplace. So I don't know why it's so fascinating, you know, when one happens. I don't know if that's a cockroach. I don't know why it would suggest there's a bunch of others. I can tell you the facts. The facts in direct lending, but really the facts for Blue Owl, I don't want to pretend to speak for everybody, is our portfolio is incredibly healthy. To understand why the private credit industry is on the defensive, just take a look at the stocks of JP Morgan versus Blue Owl in the month following Tricolor's bankruptcy. Blue Owl and its peers plummeted as investors sought to understand the collapse of the subprime auto lender and subsequent failure of first brands and auto parts conglomerate. Culpability was initially placed on private credit, and even as it became clear that direct lending was a really small fraction of the exposure in both bankruptcies, investors decided to sell shares first and ask questions later, as one analyst told me. The stocks have rebounded over the last week or so, but the episode shows just how fragile the private credit sentiment is amid its rapid growth, guys.

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