Private credit funds lent a lot of money to software companies at the beginning of the decade when they were being snapped up in a rush of expensive buyout deals. Now many of these tech businesses are braced for disruption by artificial intelligence, and some might end up defaulting on that debt. I fear private credit firms won’t recover as much of their loans as they’d hoped.
Lenders expect a certain amount of trouble when backing riskier midsized companies. Losses depend on the number of defaults in their portfolio as well as how much value they’re able to claw back if there’s a problem. While the number of these businesses defaulting on their borrowing isn’t high by historic standards yet, creditors need to worry about the second part of the equation.
Private Credit Has an AI Recovery Problem
