Distress in private credit
Private‑credit markets are flashing warning signs: loans to small companies—software firms especially—are showing 'alarming' distress, even as overall bank capital rules ease. That combination raises refinancing and covenant risks for owner‑operators and could pressure valuations in middle‑market deals. (businessinsider.com)
Houlihan Lokey’s new Private Credit DataBank aggregates more than 60,000 loan valuations, giving the firm a loan‑level view used in its recent market newsletter. (financialcontent.com) The Bank for International Settlements reports outstanding loans to SaaS firms rose from about $8 billion in 2015 to over $500 billion by end‑2025, representing roughly 19% of total direct loans. (bis.org) Morgan Stanley analysts forecast U.S. direct‑lending default rates could climb toward 8% as AI‑driven disruption pressures software borrowers and a concentrated maturity wall approaches. (bloomberg.com) Fitch’s private‑credit tracker shows U.S. private‑credit default rates eased to 5.4% in the February 2026 trailing‑12‑month period while companies with up to $25 million EBITDA recorded a 10.7% default rate. (fitchratings.com) JPMorgan has reduced valuations and tightened financing terms on loans tied to private‑credit clients after marking down software‑linked loans, an action cited by market reporters as a precursor to more cautious bank lending to credit funds. (cnbc.com) U.S. regulators on March 19, 2026 proposed a rewrite of the capital framework that the Fed and other agencies say would modestly lower capital requirements for some banks — Bloomberg estimates an aggregate common‑equity‑tier‑1 reduction of about 4.8% for the largest firms — and the agencies have opened a 90‑day comment period. (bloomberg.com) Industry research from the Alternative Credit Council and Houlihan Lokey places global private‑credit assets at roughly $3.5 trillion, underscoring the scale of potential refinancing and liquidity pressures if distress widens. (aima.org)
