Credit Market’s Reality Check Follows Decade of Loose Lending

The risks of more than a decade of loose lending came into clear view on Sept. 28.

That was when a little-known company called First Brands Group suddenly filed for Chapter 11 bankruptcy after a 10-year, debt-fueled acquisition spree had turned a tiny Ohio manufacturer into one of the world’s largest makers of replacement auto parts. The roughly $10 billion it owed creditors—and the fraud its advisers (and, later, federal prosecutors) would ultimately allege—sent shock waves through Wall Street.

First Brands’ lenders included investment funds managed by some of the financial world’s biggest names, including Jefferies Financial Group ...