Key Takeaways
- • Lord Abbett's Steve Kuppenheimer warned that private credit loans originated when base rates were near zero, including those from 2021 and 2022, face heightened refinancing pressure as they approach maturity at higher prevailing rates.
- • Default rates across private credit are running at roughly 3% to 4%, according to Kuppenheimer, versus a historical average of about 2%.
- • The warning addresses a $1.8tn private credit market already under scrutiny over borrower quality, fund outflows, and exposure to software firms vulnerable to AI disruption, particularly in the US.
- • Recent failures, including UK non-bank lender Market Financial Solutions, US auto parts supplier First Brands Group, and subprime lender Tricolor Holdings, have raised questions about underwriting standards and exposed banks to potential losses.
- • Apollo's Brigitte Posch said sectors face greater refinancing pressure as borrowing costs rise and asset valuations fall below outstanding debt, while Australian regulators temporarily restricted distribution of three more private credit products.
Summary
Private credit borrowers that took on debt during the low-interest-rate environment of 2021 and 2022 face rising refinancing risk as their loans approach maturity, with investors warning that defaults across the asset class remain elevated, according to Bloomberg. Steve Kuppenheimer, partner and head of private investments at Lord, Abbett & Co, said loans originated when base rates were close to zero could face particular pressure as borrowers refinance at higher interest rates. Speaking at the Milken Asia Summit in Singapore, he estimated default rates at around 3% to 4%, compared with a historical average of approximately 2%.
The warning comes amid heightened scrutiny of the $1.8tn private credit market, where concerns about borrower quality, fund outflows, and exposure to software companies vulnerable to artificial intelligence disruption have weighed on sentiment, particularly in the US. Recent corporate failures have added to questions about underwriting standards and risk management. The collapse of UK non-bank lender Market Financial Solutions earlier this year exposed banks to potential losses amid allegations of financial irregularities, following defaults by US auto parts supplier First Brands Group and subprime lender Tricolor Holdings in the second half of 2025.
Regulatory oversight is also tightening. In Australia, regulators temporarily restricted the distribution of three additional private credit products on Thursday.
Brigitte Posch, partner and co-head of Asia Pacific Credit and Hybrid at Apollo Global Management, said certain sectors face greater refinancing pressure as borrowing costs rise and asset valuations decline relative to outstanding debt. Recoveries may also depend on private equity owners' ability and willingness to sell underlying businesses.
The warning comes amid heightened scrutiny of the $1.8tn private credit market, where concerns about borrower quality, fund outflows, and exposure to software companies vulnerable to artificial intelligence disruption have weighed on sentiment, particularly in the US. Recent corporate failures have added to questions about underwriting standards and risk management. The collapse of UK non-bank lender Market Financial Solutions earlier this year exposed banks to potential losses amid allegations of financial irregularities, following defaults by US auto parts supplier First Brands Group and subprime lender Tricolor Holdings in the second half of 2025.
Regulatory oversight is also tightening. In Australia, regulators temporarily restricted the distribution of three additional private credit products on Thursday.
Brigitte Posch, partner and co-head of Asia Pacific Credit and Hybrid at Apollo Global Management, said certain sectors face greater refinancing pressure as borrowing costs rise and asset valuations decline relative to outstanding debt. Recoveries may also depend on private equity owners' ability and willingness to sell underlying businesses.
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