Morgan Stanley expects private credit default rates to rise to 8%, as the fundamentals of loans in the software industry face challenges.

NightAirdropper · 2026-03-17T04:35:19+00:00

Morgan Stanley forecasts that as artificial intelligence develops, the direct loan default rate in the software industry will rise to 8%. Although it has not yet had a significant impact on the fundamentals of private credit, high leverage and upcoming debt maturities may push the default rate to its highest level since the pandemic. The software industry makes up 26% of business development company portfolios.

NightAirdropper

2026-03-17 04:35:19

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Morgan Stanley states that as advances in artificial intelligence continue to disrupt the software industry, default rates on direct loans are expected to rise to 8%. In its report, it notes that although the disruptive impact of AI has not yet had a “material” effect on the fundamentals of private credit, the high leverage in the software sector and upcoming debt maturities could push default rates to levels not seen since the pandemic. Software is the largest industry in the business development company’s portfolio, accounting for about 26%. The private credit collateralized loan obligation (PCCLO) that securitizes middle-market loans has a 19% exposure to software, with many loans nearing maturity.

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