JPMorgan Aids Coherent in Debt Refinancing

In September, JPMorgan assisted Coherent, a laser and optics company, in refinancing its debt with a new $1.25 billion private credit loan, along with a $700 million revolving credit line. Notably, the deal included a newly popular contractual clause referred to as the “J. Crew Blocker.”

This term stems from a 2017 scenario involving J. Crew, where, under creditor pressures, the brand executed a “trapdoor” maneuver transferring a $250 million trademark to a company in the Cayman Islands, leasing it back afterward. This tactic effectively shielded the assets from creditors in case of bankruptcy, allowing the new entity to raise an additional $300 million, which understandably upset previous creditors hoping for a different outcome.

Both JPMorgan and Coherent have been reached for comment.

The inclusion of the J. Crew blocker in the JPMorgan-Coherent agreement is notable. In the third quarter of 2025, about 45% of private credit deals featured a J. Crew blocker, a rise from 26% the previous year and from just 15% at the start of 2023, according to Noetica, a private credit trading advisory firm. Their extensive database, which utilizes AI for contract analysis, encompasses over $1 trillion in transactions and serves advice to almost all major corporate law firms in the U.S.

Furthermore, Noetica indicates that lenders, particularly large banks issuing broadly syndicated loans, are becoming more stringent regarding various legal aspects in private credit transactions. Dan Wortman, Noetica’s CEO, noted that while default and breach rates aren’t unusually high right now, the cautious behavior of banks suggests they are preparing for potential future issues. “What the data shows is that lenders are quietly preparing for an impending crisis,” he explained. “The structural protections for new credit transactions are getting stronger.”

From a personal standpoint, it seems to me that lenders are genuinely worried about the credit market’s future, and this concern is evident in their contractual terms.

Relatedly, the term “anti-PetSmart” has emerged. This refers to a 2018 incident when PetSmart acquired Chewy for $3 billion and shifted some shares to a subsidiary not bound by the guarantees required by PetSmart’s lenders. This move effectively moved Chewy stock beyond creditors’ reach, which understandably frustrated the creditors’ legal teams.

As of 2023, only 4% of private credit deals tracked by Noetica contained anti-PetSmart provisions, but these figures are projected to rise to 28% in Q3 of 2025.

On a similar note, protections preventing companies from incurring new debt or sidelining old creditors without unanimous approval are now included in 84% of transactions, a substantial increase from 42% last year. Leverage ratios, which measure how much lenders are willing to extend based on a company’s earnings—defined as EBITDA—are also decreasing.

However, there’s a silver lining. Wortman mentioned that lenders are becoming more lenient regarding how borrowers can utilize their funds. Over the period, Noetica’s database has shown borrowers gaining more freedom to invest, pay dividends, and secure more favorable terms regarding EBITDA calculations.

But, honestly, I’m not entirely sure why this is occurring, even as the terms surrounding private credit deals tighten.

“Conditions never change randomly,” he pointed out. “There are sophisticated parties behind these agreements employing intricate data sets and strategies. So, I think this situation isn’t coincidental; it reflects current market sentiment among both lenders and borrowers.”

Reports suggest that small disparities are starting to surface in the credit market. Specifically, Lincoln International has noted an increase in contract defaults—from 2.2% in 2024 to 3.5% now—based on proprietary data. Payment-in-kind transactions, in which companies facing difficulties delay interest payments, have similarly grown from 6.5% in Q4 of 2021 to 11% currently.

Kroll Bond Ratings has indicated, through analysis of 2,400 companies holding $1 trillion in private debt, that default rates may peak at around 5%.