Always interesting to see hn's take on financial matters like this. ;)
Private credit is not something that stands in isolation in the economy. By the time it takes an actual loss in hard cash that means the equity layer - PE funds, ahem incubators, general equity portfolios etc...are already wiped out. Not took a haircut. WIPED...completely
Secured credit gets cash first, then unsecured credit, then equity holders. (often taxman and employee salaries are number 0 before even secured but that depends on jurisdiction, but largely irrelevant to current discussion).
So when people say there is trouble in private credit as if they had some cunning insight into a hidden risk hotspot they found in financial market...no that's not how that works. This isn't like the synthetic instrument CDO bullshit ala big short. Private credit is TRUE DEBT in the classic sense like your mortgage. Private credit is by definition NOT number 1 in queue when things go south. That's not to say there aren't problems, but if private credit has problems then the conversation is realistically "global financial system has problems"
1 days ago [-]
1 days ago [-]
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https://news.ycombinator.com/item?id=47349806 US private credit defaults hit record 9.2% in 2025, Fitch says (marketscreener.com)
115+ comments
(I've moved JumpCrisscross's reply to your post to the other thread too - https://news.ycombinator.com/item?id=47350667)
Private credit is not something that stands in isolation in the economy. By the time it takes an actual loss in hard cash that means the equity layer - PE funds, ahem incubators, general equity portfolios etc...are already wiped out. Not took a haircut. WIPED...completely
Secured credit gets cash first, then unsecured credit, then equity holders. (often taxman and employee salaries are number 0 before even secured but that depends on jurisdiction, but largely irrelevant to current discussion).
So when people say there is trouble in private credit as if they had some cunning insight into a hidden risk hotspot they found in financial market...no that's not how that works. This isn't like the synthetic instrument CDO bullshit ala big short. Private credit is TRUE DEBT in the classic sense like your mortgage. Private credit is by definition NOT number 1 in queue when things go south. That's not to say there aren't problems, but if private credit has problems then the conversation is realistically "global financial system has problems"