Private Credit Defaults Would Hit 13% in UBS Worst Case for AI

Private credit could see default rates surge to as high as 13% in the US if artificial intelligence triggers an “aggressive” disruption among corporate borrowers, according to UBS Group AG.

The asset class is more exposed to AI risk than the markets for leveraged loans and high-yield bonds, which could see default rates rise to as high as 8% and 4%, respectively, in an aggressive disruption scenario, UBS strategists including Sachin Ganesh wrote in a note Monday.

AI disruption fears are accelerating weakness in credit globally, as investors grapple with the prospect that it renders existing business models obsolete. ...