US Attorney Jay Clayton of the Southern District of New York says his office is reviewing potential valuation discrepancies across the private credit market. Speaking at the Bloomberg Global Credit Forum in New York, Clayton focuses on differences in how private credit assets are marked on different balance sheets, describing cases where most participants use one valuation level while a small number use substantially higher marks. He links the concept to prior industry blowups at First Brands Group, Tricolor Holdings and 777 Partners, and says his team is being directed to look across the marketplace for such gaps, including whether entities marking higher values have incentives tied to fees.
Clayton also cautions against alarmism about private credit. He says he does not currently see a clear “transmission mechanism” through which problems in the private credit sector would spill over into the broader economy. The remarks follow earlier comments by Clayton about valuation practices at Wall Street firms and reporting that the Justice Department’s Manhattan office has sought information related to BlackRock TCP Capital Corp., likely connected to earlier private-loan valuation concerns. The private credit sector has also faced calls for greater pricing transparency, including efforts highlighted by firms such as Apollo.
