A move by JPMorgan Chase to mark down the value of certain loans to private credit players will reduce lending to the funds, a source familiar with the matter said.
The move from the largest U.S. lender extends a flurry of jitters across the roughly $2 trillion private credit market, with Wall Street juggernauts facing heightened withdrawal requests in recent weeks.
The bank’s credit agreements for private credit allow it to re-mark valuations based on the collateral of the fund if there is a market dislocation, the source had told Reuters earlier, adding that the marks are not significant.
The bank went through its financing portfolio name by name and then sector by sector and put different marks on loans such as those with underlying software exposure, the source said.
The move means the lender is restricting the amount of leverage for the borrower, the source said.
The decision has impacted a small cohort of JPMorgan’s borrowers, the source said, adding that the lender reserved the right to revalue private credit assets at any time.
Shares of the bank were down more than 2% in midday trading amid a selloff in the broader market. .N
“There’s an unfortunate and self-reinforcing relationship between lower marks and less available liquidity,” said Sean Dunlop, director of equity research at Morningstar.
That said, for most firms, marking down loans requires a discrete trigger, like missing an interest payment, Dunlop said, adding that JPMorgan is an exception to the rule.
Concerns over credit quality – highlighted last year by the collapses of First Brands and subprime lender Tricolor – have intensified in recent months as investors worried about AI-powered products’ threat to software companies’ pricing power.
The rush to liquidity has prompted several large players, including rival Morgan StanleyMS.N and BlackRockBLK.N, to limit redemptions as requests for key funds crossed the 5% threshold, which conventionally allows an asset manager to do so.
Some, like Blackstone BX.N, have responded by relaxing the limit to 7% or beyond.
The move has not triggered any material margin calls so far, a Bloomberg report added, citing people familiar with the matter.
Reuters
