By Patturaja Murugaboopathy

Oct 22 (Reuters) - U.S. loan funds are seeing sharp

outflows this month as the bankruptcy of First Brands Group

raises concerns over opaque financing and the robustness of

underwriting standards in the private credit market.

Loan exchange-traded funds, which invest in syndicated loans

that are often bundled into collateralized loan obligations

(CLOs), saw about $1.5 billion in outflows in October - their

first monthly withdrawal in six months, according to Lipper

data.

"Investors are finally starting to question the loose

underwriting in the loan market, driven by massive inflows into

both private credit and broadly syndicated loans," Jeffrey

Rosenkranz, portfolio manager at Shelton Tactical Credit Fund,

said.

He said he expected early defaults tied to fraud would give

way to broader distress among weaker businesses and poorly

managed firms as the credit cycle progressed.

The collapse of First Brands and subprime auto lender

Tricolor has unsettled parts of Wall Street's

multitrillion-dollar credit market, which includes leveraged

loans, CLOs, trade-finance funds and asset-backed auto lending.

The bankruptcies have already triggered losses at major

financial firms. JPMorgan called its $170 million charge tied to

Tricolor "not our finest moment," while Jefferies' CEO said the

firm was defrauded by First Brands.

A spokesperson for First Brands' CEO said on October 10 he

was evaluating the best path forward to help maximize value for

its customers, suppliers, employees and lenders.