Know More. Risk Better. Credit Cockroaches: Infestation or Isolation?
Oct 31, 2025
In this discussion, Peter Simon, co-head of U.S. Financials at CreditSights, and Meghan Neenan, head of North American non-bank financials at Fitch Ratings, delve into recent ‘cockroach risks’ in U.S. capital markets. They explain how credit quality for regional banks remains stable despite recent bankruptcies, and highlight minimal BDC exposure to distressed companies. The pair also explores liquidity risks from interconnectedness between banks and non-bank lenders, and the impact of falling rates on BDC dividends, all while emphasizing the strength of capital cushions.
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Regional Bank Credit Appears Stable
- Regional bank credit metrics are stable to improving across reported quarters.
- Non-performing loans and net charge-offs were mostly flat or slightly better, indicating no broad credit turn.
BDC Losses Are Idiosyncratic
- BDCs' aggregate credit performance shows low average losses but wide dispersion across managers.
- Losses are idiosyncratic, reflecting credit selection rather than a common sector stress.
Check If Exposure Is BSL Or Private Credit
- Distinguish between broadly syndicated loan exposure and private credit when assessing BDC losses.
- Check deal sleeve types because recent bankruptcies mostly affected BSLs, not private-originated loans.