$UBS predicts private credit default rates to reach up to 15% in bear case (FT)

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UBS warns of 15% default rates in private credit — Wall Street is starting to worry.

(Bloomberg) — A few weeks ago, analysts at UBS Group AG laid out a worst-case scenario for defaults in the private credit sector. Their outlook just became more grim.

Strategists including Matthew Mish say private credit could see default rates surge as high as 15%, two percentage points more than the firm forecast less than a month ago, if artificial intelligence triggers an “aggressive” disruption among corporate borrowers.

“What is new: a clearer catalyst — rapid, severe AI disruption,” according to the UBS strategists Tuesday.

Direct lenders that took a lead role in financing software companies in recent years now look dangerously exposed to AI’s impact, stirring comparisons to the 2008 financial crisis. Some estimates suggest that the firms have 40% of all sponsor-backed loans tied up in the software industry.

https://www.swissinfo.ch/eng/private-credit-fears-deepen-with-ubs-warning-of-15%25-defaults/90993240