Some of Europe’s major private markets firms sold off on Friday as concerns over lending standards in U.S. markets swept across the Atlantic.
London-listed ICG closed 5.5% lower, while CVC Capital Partners, which is headquartered in Jersey, lost about 6.6%. Swiss private markets firm Partners Group fell 3.4%, as Sweden’s EQT was down 4.6%.
The moves follow a widespread sell-off among U.S. regional banks this week, as fears grow over risky lending practices potentially spilling over from the private credit market into the broader banking space.
ICG manages more than $30 billion in private debt assets, about 25% of its total asstes under management as of late June. Partners Group manages $38 billion in 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 sharper focus in recent weeks following U.S. car parts maker First Brands’ implosion and the subprime auto lender Tricolor’s bankruptcy. Investment bank Jefferies, which had exposure to First Brands, closed down 11% on Thursday before rebounding Friday.
While First Brands’ collapse stemmed mainly from its complex borrowing arrangements within the supply-chain financing and invoice receivables space, the debacle has spotlighted broader concerns over increased leverage and potentially lax credit standards.
J.P. Morgan CEO Jamie Dimon said more potential stress could lay hidden within the credit system. “When you see one cockroach, there’s probably more,” said Dimon during J.P. Morgan’s third-quarter earnings call Wednesday. “Everybody should be forewarned on this.”
In an exclusive interview with CNBC, Joachim Nagel, president of Germany’s Bundesbank and ECB governing council member, warned this week of “spillovers” from the private credit market, calling it a “regulatory risk.”
“I’m concerned when it comes to private credit, private lending,” Nagel told CNBC’s Karen Tso at the IMF and World Bank annual meetings in Washington on Wednesday.
“This market is really big now — as far as I know it’s more than $1 trillion, and we know there are some spillovers from the less-regulated market participants to the more regulated market participants. We as regulators, we have to take a close look at it.”
Meanwhile, Tobias Adrian, director of the IMF’s Monetary and Capital Markets Department, said the group is now keeping closer tabs on non-bank financial intermediaries, particularly in the private credit space.
“This leverage is probably resilient, but of course, we are watching underwriting standards very closely,” Adrian told CNBC’s Tso.
