Private Credit Fears Deepen With UBS Warning of 15% Defaults
SWI swissinfo.ch • • general
Key Points:
- UBS analysts raised their worst-case default rate forecast for private credit to 15%, citing potential severe disruption from artificial intelligence impacting corporate borrowers, especially in the software sector.
- Direct lenders heavily exposed to software companies, which account for about 40% of sponsor-backed loans, face heightened risk reminiscent of the 2008 financial crisis, as evidenced by Blue Owl Capital's fund closure and asset sales.
- Industry warnings have intensified, with activist investors and prominent money managers drawing parallels to pre-subprime mortgage crisis conditions and JPMorgan CEO Jamie Dimon criticizing risky lending practices.
- Business development companies are under pressure to sell assets and return capital, raising concerns about increased leverage and risk masking, though some experts argue the market contraction fears may be exaggerated.
