Private Credit Jitters Are Rising — But This Isn’t 2008 — Evening Brief – 11.12.25 

Markets have grown uneasy about private credit in recent weeks, triggered by a cluster of high-profile bankruptcies and fraud allegations. With private credit now a $1.7 trillion asset class (more than double its size five years ago) and leveraged loan default rates creeping toward 5%, investors are understandably on edge. Yet despite stretched valuations, thin cash buffers, and elevated leverage across credit markets, the real surprise is how limited the market fallout has been. 

Importantly, the recent headline failures — First Brands, Tricolor, and Cantor Group — were bank-originated loans, not private credit deals. Private lenders shouldn’t celebrate too quickly, though. These cases underscore a familiar truth: during boom periods, rapid loan growth and abundant liquidity mask weak credits; when the cycle turns and refinancing dries up, hidden risks surface. 

This still isn’t 2008. The Global Financial Crisis was driven by excessive leverage and dangerously thin capital buffers across the financial system. Today’s stress is different: concentrated in credit selection missteps, uneven underwriting standards, and exposure to more vulnerable segments of the economy — not a structurally undercapitalized banking system. 

Why are failures emerging now? Economic softening is exposing fragility: Labor Market Strain: Hiring is slowing, job openings have fallen sharply from pandemic highs, and lower-income workers are showing early signs of distress. Housing Pressure: Oversupply in several markets and higher carrying costs are weighing more heavily on middle- and lower-income households. 

The divergence is stark: the top 20% of households — who own nearly 87% of U.S. equity and mutual fund assets — continue to benefit from strong market performance, while the bottom 80% is feeling the squeeze of stagnant wages, rising housing costs, and tighter credit conditions. Consumer stress often precedes small-business and lower-tier corporate credit stress — and we are now entering that phase. 

This has created a split credit ecosystem. Larger institutional private credit platforms have become highly sophisticated, risk-disciplined lenders with robust structures, covenants, and workout capabilities. In contrast, lenders dependent on growth — including smaller banks, subscale non-bank lenders, and originators chasing volume — are more exposed to weaker borrowers, looser underwriting, and covenant-lite structures. 

Some regional banks have been hit first. If conditions deteriorate further, smaller and growth-driven lenders — both banks and non-banks — are more likely to follow.