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by paganel 91 days ago
Even the best due diligence can't do anything if a crisis (not necessarily banking-related, a Middle East might just do the trick) starts manifesting itself and now many of those businesses have issues in paying down the debt they owe.
2 comments
harmmonica 88 days ago
Late to reply here, but, yes, agree generally, though I don't think what these private credit companies are being accused of falls into that category (i.e., I think they're being accused of playing fast and loose with their due diligence, which was baked into their competitive advantage over the banks themselves. The competitive advantage being "we'll close quickly" without all the fuss a bank would require).

I've had quite a few conversations with someone who claims to be in the know about this situation (though, really, I don't think they're any more in the know than anyone!) and they swear up and down it's all a misunderstanding, which, cynic though I may be, immediately makes me think the accusations are at least somewhat true.

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ambicapter 91 days ago
"I did my due diligence but didn't anticipate these risks". Doesn't sound like due diligence to me. Not having a plan to unwind your position if SHTF doesn't sound like due diligence to me. You can argue it any way you like but it boils down to "The money was good and I didn't think the worst was gonna happen".
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harmmonica 88 days ago
I agree with this and tend to think due diligence needs to not only account for the regular course of business, but also for the exceptional circumstance. You'll never be able to accuse someone of not thinking of the exceptional UPSIDE circumstance, of course. The problem is the complete ignorance of the exceptional downside. That said, your parent is right that you can't really do due diligence on "war in Iran." Instead you something like "ok, if there's a shock to the system and 20% of our loans default what does that mean for our business?"
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paganel 90 days ago
My comment was mostly against the idea that due diligence is a silver bullet, it isn’t. Of course that it can “catch” the most egregious cases, like outright fraud, but, again, no due diligence process can read the future.
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