Counterparty fraud has emerged as the defining feature of a wave of recent high profile credit meltdowns, prompting lenders to double down on the due diligence of the executives behind the companies they back.
A laundry list of bankruptcies in the last six months including First Brands, Tricolor, Broadband Telecom and FAT Brands have exposed management teams with checkered track records and investors who either missed or overlooked those histories in the rush to deploy capital. Some of those same lenders are now the ones nursing significant losses on their investments.
In response, a growing number of credit managers, especially in ballooning areas of debt markets, like private credit, are turning to private investigators and deeper background checks to vet executives before committing capital, sources told 9fin.
The recent spate of blowups has only reinforced that shift and pressured managers to sniff out what one lender called “character challenged individuals.” One way of doing this is by digging into the personal and professional histories of executives at the helm of target investments.
Ann Gittleman, co-head expert services at Kroll, which offers both standard public records searches and enhanced reviews, noted a rise in interest from clients...
