In KBRA’s view, artificial intelligence (AI) poses diffuse and manageable credit risks to software companies held by direct lenders. While some sponsor-backed borrowers with near-term maturities and structural exposure to AI disruption may face significant pressure—contributing to a modest increase in overall default rates—we find that most software-adjacent borrowers have business models, financial flexibility, and sufficient time to navigate the risks and opportunities presented by AI.
Although AI-related disruption may result in idiosyncratic stress for certain companies, sponsors, and lenders, we believe any resulting losses are likely to be absorbed by KBRA-rated direct lending entities and transactions without significant ratings migration. We expect the primary transmission of these risks to be reflected in increasingly differentiated returns across private credit investment vehicles.
Our view is that broader macroeconomic headwinds—including a prolonged Middle East conflict,…
Log in or Sign up for free access to this report.
KBRA is a global full-service rating agency with a mission to set a standard of excellence and integrity. Established in 2010, KBRA remains dedicated to the restoration of trust in credit ratings by creating new standards for assessing risk and by offering timely and transparent ratings. KBRA provides market participants with an alternative solution by delivering in-depth research across various sectors within the United States and European markets. We strive to provide the investment community with the products and tools needed to make informed investment decisions.