Could private credit cause the next financial crash?

The recent bankruptcies of a little-known auto-parts supplier called First Brands and auto lender Tricolorhas sparked talk about a looming financial crisis in a booming but much misunderstoodcorner of finance.

Jamie Dimon, the CEO of JP Morgan, sent shivers through financial markets earlier this month when he referred to these bankruptcies as a ‘cockroach’ and warned: ‘When you see one cockroach, there are probably more.’

His comments were taken as a broadside against private credit, a niche corner of debt markets that has seen blazing growth in recent years. In private credit, non-bank financial firms such as Apollo Global Management, Blackstone and KKR pool capital from investors to lend out to corporations, and, increasingly, to other sections of the economy. It’s a form of shadow ban