What with headlines focused on the Strait of Hormuz and scare stories about out-of-control AI, forecasts of a storm in the less vivid field of ‘private credit’ have dropped down the news agenda. But thunder continues to rumble since the collapse in London of the short-term property lender Market Financial Solutions, now being investigated for fraud – and there are connections between private credit, Iran and AI that could turn a storm into a hurricane.

Governor Andrew Bailey of the Bank of England first talked of ‘alarm bells’ in the US private credit sector last October. The latest indicator is a stampede of investor withdrawals from Blue Owl, a prominent New York private lender. Now comes a warning from JP Morgan Chase chairman Jamie Dimon – though apparently ‘not worried’ about his own bank’s $50 billion exposure – that losses in this unregulated arena are worse than they should be and heading higher, because of weak lending criteria and lack of the valuation yardsticks that provide rigour in public bond markets. It’s also worth noting how opaque the private credit sector is: Dimon referred to a total volume of $1.8 trillion while other sources talk of $3.5 trillion – telling us that, like credit derivatives before the 2008 cataclysm, no one actually knows how much toxic stuff is actually out there.

What’s the conflict in Iran got to do with it? The raised interest rates needed to respond to an inflationary spike driven by high oil prices (or even an absence of previously expected rate cuts) will accelerate the pace of private credit defaults. And the  segue to AI? It turns out that among the busiest borrowers in the sector are US software companies locked in an urgent Darwinian struggle to emerge as AI champions. Many will fail, leaving bad debts behind.

The big funders behind intermediary private lenders are pension funds and insurers as well as banks, which should be strong enough to absorb losses and contain a mid-sized crisis. Or maybe not: one way or another, when the war’s over, we’ll be back to talking about private credit.

Nuclear promise

Beware of hailing any state-backed engineering project when it is first announced: the time for praise, if at all, is when the job’s finished, too often years late and vastly over budget. With that proviso, I’m glad to see Rolls-Royce has been given the go-ahead and a £599 million loan from Labour’s ‘national wealth fund’ to develop the UK’s first small modular nuclear reactors at Wylfa in Anglesey.

Never mind that successive governments have dithered over SMR technology since Rolls-Royce first proposed it in 2015, the year in which the previous nuclear station at Wylfa closed. If their promise is fulfilled, SMRs will not only plug the UK energy gap more quickly and at a lower cost than the nuclear monsters of Hinkley Point and (if it ever happens) Sizewell C; they might even give us a new industrial winner to export to the rest of the world. I’m not holding my breath, but I live in hope.

Border trouble

At Bergerac airport, the usually courteous border officer was in a state of irritation as he faffed with the camera-on-a-stick that is the EU’s new ‘entry/exit system’; a bearded techie’s useless suggestions over his shoulder made matters worse as the passenger in front of me took ten minutes to process. If you’re heading anywhere in Europe soon, brace for tiresome delays – or worse, being left behind by departing aircraft, as happened to travellers trying to leave Milan for Manchester on Sunday.

But if you had holidays in mind anywhere in the eastern Med, you’ve probably already cancelled for fear of war, even if you hadn’t decided it looked too expensive anyway. Barclays reports a 3.3 per cent fall in all foreign travel spending in March compared with a year ago, with 70 per cent of poll respondents citing cost and 57 per cent worried about disruption. Good news for UK holiday-cottage owners as ‘staycations’ boom; and maybe, with our eco hair-shirts on, we should think of low-cost international jaunting as a one-generation bonus now taken away. But it was also a manifestation of a more harmonious world, and we seem to have lost that too.

Snake ’n’ sheikh

Having never met Richard Caring, my mental picture of London’s most enduring hospitality tycoon – and sometime rag-trade associate of the former BHS billionaire Philip Green – is drawn from an article written long ago by the veteran City journo Chris Blackhurst, who found him ‘more like a snake-hipped, ageing ballet dancer… I swear I’ve never seen anyone with whiter, more perfect teeth’.

Still gleaming at 77, Caring has announced the sale for £1.4 billion of a majority interest in his empire, which encompasses the 47-branch Ivy Collection, Annabel’s nightclub and Harry’s Bar among other upmarket venues, to an investment company controlled by Abu Dhabi’s deputy ruler and the UAE’s ‘national security adviser’, Sheikh Tahnoon bin Zayed Al Nahyan – who also recently bought a $500 million stake in the Trump family’s crypto interests.

Investment in British business by Gulf autocrats is, of course, broadly welcome so long as the business isn’t a national newspaper: it was Sheikh Tahnoon’s younger brother Sheikh Mansour who tried to buy the Telegraph titles. One report goes as far as to call the sale, which ends long uncertainty over Caring’s ownership intentions, ‘a rare boon’ for a UK restaurant sector crippled by wage hikes, business rates and tight consumer spending.

But I wonder. I suspect Caring has capped a long career of shrewd deal-making by bagging a price that even a super-rich sheikh with his own spy network might live to regret – and that the sector will look back on as the peak of a teetering market. The news would certainly make me nervous if I were a low-paid Ivy waiter.