Private Credit Bubble's Leak Gets Louder

A report in the Financial Times covers the first case in which a company being upheld by the $2 trillion “private credit” bubble (i.e., leveraged loans from hedge funds and, in turn, from banks) has been abandoned to its creditors, causing them a large ($5 billion) loss in stock value. The company is a producer of software known as Medallia, which had had a private equity firm named Thoma Bravo attached to it as a leech for the past five years. Thus, as the FT pointed out, this is the first case in which “private credit"—supposedly an arms-length coupon-clipping debt operation—suddenly became private equity, forcing the surprised lenders to try to strip and loot the underlying company themselves. This big case will scare more of the “private credit” lenders into withdrawing, or trying to withdraw, their loans from the bubble as it totters.