ExcessDefaults

Ugh there are so many BAD backleverage pieces being written rn. 😤 Look, I get it that the financial media is focusing on private credit backleverage exposure. But, they're being so lazy about it. Just grabbing US banks #s from disclosures, in a chart (btw awful formatting Bloomberg, not even ranking by size) and writing some grafs? Ok, sure fine. But could you at least peel back a few layers of the onion? 1) there are a LOT of non-US banks with backleverage books. usually they have riskier terms than the US banks (but not always!). there are also a lot of US banks where the non-US desks offers different (riskier!) terms to the US PC funds than the US team. 2) there's a lot of non-US private credit backleverage! you think European direct lenders don't borrow? the ENTIRE European fund finance market runs non-MTM ffs. oldest trick in the fund finance book is a big US PC shop arbitraging the (usually French) structuring guys for some structure they could NEVER get from a big US bank. that said, some European banks are really good here. some aren't! even happens with Canadian banks now. and Asian... 3) there are a LOT of non-banks in this game. 4) there are a LOT of smaller US banks in this game 5) PC backleverage is a (semi-traded) market! the big banks (and non-banks) LEAD deals, sell them, and skim fees. sometimes CLOs or other deals are issued out these structures too. Mostly in the US, but not entirely! 6) some banks have even de-risked synthetically (SRT, insurance, re-tranching, whatever). No, nowhere near like GFC-level synthetic CDO or monoline nonsense or whatever. But also you can't ignore it if you're going to be intellectually honest 7) even IF you're going try and proxy bank exposure to private credit with their NDFI loan book or whatever you need to remember that there are NO consistent definitions of any of this stuff 8) PC gets financed in LOTS of ways that aren't bank loans. you don't even mention rated feeders? CLOs?subscription lines? secondaries? continuation funds? NAV loans? TRS? FO/LOs? Repos? Sale/buy-backs? Ffs there are (lots!) of banks out there with WAY more exposure to PC in non-loan products than loan products 9) banks run 1 delta private credit businesses. sometimes in their asset management arms, sometimes not! Some have JVs, some don't, etc Look, I mention all of this stuff NOT to be alarmist. I actually think PC leverage is low, most of the big backleverage lenders and borrowers are really smart, PC leverage obviously way lower than the BSL market which dwarfs PC btw and which has all the same financing structures + more that PC does. Same goes for (parts!) of HY, infrastructure lending, yada yada All this is just to say, the financial media have almost NO idea what they're talking about here in terms of PC backleverage? Ok? None. Zero. Do with that what you will