LONDON (Reuters) -Apollo Global Management, Blackstone and Ares Management had no exposure to U.S. companies First Brands and Tricolor at the time of their bankruptcies, executives said on Wednesday, attributing
the link between private credit and the collapses to misinformation.
The failure of auto parts supplier First Brands and car dealership Tricolor rattled debt markets and put the regulation of the fast-growing private credit industry under the spotlight.
Several banks including U.S. Jefferies have reported exposure to First Brands, while the UK's Barclays said last week it had taken a 110 million pound charge on the collapse of Tricolor.
Apollo's co-head of European credit, Tristram Leach, said First Brands was "predominantly financed" by public market lending, loans which are typically arranged by banks.
Blair Jacobson, co-president at Ares said, only 2% of First Brands' balance sheet was linked to private credit.
"There has been a lot of misinformation on this credit," Daniel Leiter, a senior managing director at Blackstone, said.
Speaking to a British House of Lords committee looking into the rise of private markets, Jacobson said that if Ares had considered backing either company "we wouldn't actually get very far" because First Brands was cyclical and exposed to a weak consumer, while Tricolor had a low-quality customer base.
REGULATORS TAKE CLOSER LOOK AT PRIVATE CREDIT
Bank of England Governor Andrew Bailey said last week the bank was planning a more detailed probe into the collapses.
Bailey said that there were parallels with the early stages of the global financial crisis and that the BoE planned to run a "stress test" with the private equity and credit industry.
Other supervisors such as the European Central Bank also want to improve visibility of private credit and other parts of the so-called 'shadow banking' sector, fearing that risks may be building about which they have less knowledge.
The private credit executives on Wednesday pushed back when asked if the sector's huge growth posed broader risks. Blackstone's Leiter said private credit was fundamentally safer than bank funding, which risked wider contagion.
(Reporting by Tommy Reggiori Wilkes; Editing by Iain Withers and Elaine Hardcastle)
