Private Credit’s Quiet, Unstoppable Rise Comes With Unknown Risk

Last month, when two private equity firms agreed to pay $4.25 billion for a division of medical technology company Baxter International Inc., they didn’t tap their banks for jumbo loans or bonds. Instead, they financed the deal through the new kings of debt: suppliers of private credit.

These days, when companies need to borrow billions of dollars or dealmakers need to finance a buyout, they often bypass public debt markets and investment banks. Now officially an “asset class,” private credit is the hot new thing on Wall Street. In just a few years, it’s muscled aside banks to become ...