Bain Capital: "U.S. Software Default Rate Could Reach Double Digits"… Impact of AI and Debt Maturities

There is analysis suggesting that, due to the advancement of artificial intelligence (AI) and upcoming loan maturities, the default rate in the U.S. software (SW) sector could soar into double digits.

Angelo Rufino, Head of North America and Europe Special Situations at the global private equity firm Bain Capital, recently stated on Bloomberg Intelligence's "Credit Edge" podcast, "We are going to see real pressure in the market," diagnosing, "This is a typical credit cycle where a particular sector has received excessive attention and massive capital inflows."

Bloomberg News reported on February 26 (local time) that his remarks indicate a much higher figure compared to the projected maximum default rate of 5% for all U.S. leveraged loans this year. This outlook is similar to the forecast given the same day by Bruce Richards, Chairman of Marathon Asset Management, who said, "The private credit software default rate could reach 15%." Bloomberg News also analyzed that this is on par with what UBS Group analysts have called a "worst-case scenario."

Bain Capital has invested significant capital in the software sector, including Rocket Software. While Bain Capital did not disclose the exact amount of software-related debt it holds, it reported that its risk exposure is less than 5%. Rufino commented, "Many software service companies will face limits in price negotiations for their products due to the rise of AI," and added, "As the time comes to realign capital structures to match the profit-generating capacity of these business models, we will witness a full credit cycle, and refinancing debt will certainly become more difficult."

However, Rufino also noted, "Given the debt reduction over the past several years and steady growth in the U.S. economy, the storm in the software sector is unlikely to spread to the broader credit market," adding, "This crisis will be limited to certain specific sectors, and there will not be a large-scale increase in defaults across the credit market as a whole."

This content was produced with the assistance of AI translation services.