Finance
Private lending to big companies showing signs of froth, executives say
Published by Global Banking & Finance Review®
Posted on October 29, 2025
2 min readLast updated: January 21, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on October 29, 2025
2 min readLast updated: January 21, 2026
Executives discuss potential risks in private lending to large companies, noting weakened standards and market competition, amid AI investment influences.
By Tommy Reggiori Wilkes
(Reuters) -Fears of a risky bubble emerging in the private credit market are overblown, but there are signs of lending standards weakening in the market for lending to large companies, executives from the industry said on Tuesday.
"The risk is when you have too much leverage and not enough liquidity you tend to have problems and I don't see us having that right now even in private credit," Anne Walsh, chief investment officer at Guggenheim Partners told the Future Investment Initiative (FII) conference in Riyadh.
Walsh, however, said there were signs of overleverage and reduced loan covenants in the market for lending to large companies, where competition is fierce.
Concerns about weak lending standards in credit markets have resurfaced after the recent collapses of U.S. auto parts supplier First Brands and car dealership Tricolor, with investors focusing on possible risks in a less-regulated market where companies have borrowed heavily from non-banks.
Executives in Riyadh dismissed these concerns, saying those collapses had little to do with private credit. Walsh said the industry enjoyed "lots of tailwinds" including U.S. fiscal and monetary stimulus and the AI investment boom.
However, some acknowledged there were certain problems appearing.
Competition for lending to large companies has squeezed private credit margins substantially over the last few years, with signs of "froth" emerging, said David Manlowe, CEO of Benefit Street Partners, a credit manager owned by Franklin Templeton.
"There will be segments of private credit that will prove to be in a bubble today, but overall we would all agree it's probably not bubbly," he said, shortly after a poll of the audience found 43% believed private credit was in a bubble and 57% did not.
Robert O'Leary, co-CEO at Oaktree Capital Management, said the artificial intelligence boom was creating an economy-wide bubble and direct lending was exposed because of the "preponderance" of loans to software companies. But the asset class had lots going for it too, he added.
(Reporting by Tommy Reggiori Wilkes, Editing by Iain Withers)
Private credit refers to loans and credit provided by non-bank entities to companies, often with less regulation than traditional bank loans. It has gained popularity due to its flexibility and potential for higher returns.
Lending standards are the criteria that lenders use to evaluate the creditworthiness of borrowers. These standards determine the terms and conditions of loans, including interest rates and repayment schedules.
Overleverage occurs when a company takes on too much debt relative to its equity, increasing financial risk. It can lead to difficulties in meeting debt obligations, especially during economic downturns.
Loan covenants are conditions set by lenders that borrowers must adhere to as part of a loan agreement. They often include financial metrics that the borrower must maintain to avoid default.
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