Despite investor fears, private credit is far from a meltdown because not all risks are the same.
The cracks in the private credit market appear to be widening.
Private credit is a significant alternative to syndicated bank loans as a source of corporate capital provided predominantly by private equity (PE) firms. The market is heavily involved in financing data center capacity, which is burgeoning along with the demand for artificial intelligence. Investors fear that the artificial intelligence capital spending boom poses a threat to the software industry and may be creating a market bubble that leaves private credit funds overly exposed.
Yet there are reasons to believe the potential damage to the private credit market remains manageable and contained.
This article appears in the May 2026 issue of Global Finance Magazine. .
To be sure, when auto parts seller First Brands announced its bankruptcy late last year, which was financed by a credit fund sponsored by investment bank Jefferies Group, it raised alarms in some quarters. Underscoring the opacity of private credit, which is largely unregulated, were allegations that First Brands had borrowed against the same receivables more than once. Meanwhile, defaults elsewhere in the credit sector hit a record high in 2025, according to Fitch Ratings, reaching a 9.2% rate, more than double the 3.6% recorded in 2023. Default rates this January continued upward, reaching 9.4% before slightly easing in February to 5.4%.
As the First Brands financing reveals, banks as well as PE firms are involved in private credit, either by financing investment funds sponsored by Ares Capital, Antares, Apollo, Blackstone, Blue Owl, and the like, or via funds of their own. With pension funds, insurance companies, and increasingly, individuals investing in private credit, law firm Quinn Emanuel warned in a March client memo that the trend may pose systemic risk, even though private credit is still a relatively small part of the overall loan market.
“The result is a transmission chain that runs from the technology companies, through private credit originators, to the regulated banks that lend to them, to the insurers and pension funds that invest alongside them, and potentially to the retirement accounts of ordinary Americans,” the memo’s authors warned.
Only a minority of small corporate borrowers are in trouble, and companies with EBITDA of $25 million or less experienced significantly higher default rates—15.8%—than larger companies in 2025. Healthcare and consumer companies have higher default rates. Fitch also notes that realized losses for first-lien lenders have been limited, with most cases resulting in full or high-percentage recoveries.
Notably, private credit default rates historically tend to run higher than those on broadly syndicated loans, a trend some observers attribute to more customized, and sometimes distressed, lending terms. The January uptick was largely driven by “distressed” exchanges and payment-in-kind (PIK) interest, according to Fitch.
AI Anxieties
Alen Lin, Fitch Ratings
Concerns are growing about PE funds exposed to software. Investors worry that AI will disrupt the software industry, leading to defaults within portfolios of private-credit loans to the sector. But most such funds are diversified, and even those that aren’t may not be as vulnerable to disruption by AI as investors fear. That’s because the large language models underpinning AI require application program interfaces to operate, so software may still be needed to facilitate the technology’s use.
“Implementing AI still requires significant effort to get it to work in a particular environment,” Alen Lin, senior director of North America corporates, technology, at Fitch Ratings, told audiences at a recent webinar held by the firm.
Of course, much depends on the type of application involved. As Fitch notes, companies producing software that is either deeply embedded in enterprise technology systems, leverages proprietary data, or operates in more regulated industries like health care and financial services could benefit from the development of AI. By contrast, those producing software for applications that aren’t so embedded, such as digital content creation or certain types of analytics and visualization tools, are more exposed to AI disruption.
Even if the AI bubble bursts, that risk is unlikely to evaporate, Lyle Margolis, senior director in Fitch’s corporates group, where he manages its private credit business, said in an interview with Global Finance. “AI is here to stay and is going to be disruptive to certain segments of the software market,” he says.
Yet the risks may be overstated. Whether measured by leverage, interest coverage, or EBITDA, “the trends in the software sector have actually been somewhat positive,” he noted. Refinancing risk for the sector is relatively benign. And data-center build-out provides one of several “significant tailwinds” for private credit in the software sector, added Dafina Dunmore, Fitch’s senior director of North American non-bank financial institutions.
Another mitigating factor: Redemption risk, which can see large outflows of capital. However, it is limited largely to business development companies (BDCs), a more liquid, retail-oriented variety of private-credit investment vehicle. Blue Owl, for example, recently blocked redemptions at one of its BDCs and liquidated some others. And the $33 billion Cliffwater Corporate Lending Fund, the largest US private-credit interval received redemption requests on 14%.
Although defaults are rising for these portfolios, redemption risk isn’t a problem for most credit funds, because investors are locked in until maturity. In addition, stress is concentrated in direct lending: corporate loans that fund working capital and growth.
Hidden Risks
To be sure, many such risks may be hidden, given private credit’s opacity. Blue Owl’s exposure to software loans, among the highest in the industry, is roughly twice as extensive as its public filings indicate, according to a recent analysis by the Wall Street Journal. The paper also found other PE firms whose credit funds exhibit software exposure exceeding what’s publicly disclosed include Blackstone, Ares, and Apollo.
Investor worries may exacerbate Blue Owl’s redemption woes since its data center financing deals involve accounting practices that obscure the risk involved. The main source of concern is likely Blue Owl’s $27.3 billion financing of Meta’s Hyperion data center in Louisiana.
Yet, S&P rates the bond backing the deal, called Beignet, as Meta’s obligation, reflecting that it bears the risk of default. Indeed, investors seem to like that cash-rich Meta stands behind Beignet. The bond was recently spread over a bond financing the CoreWeave data center, which isn’t backed by the hyperscaler.
Still, some wonder if the risks are adequately priced into these issues.
Quinn Emanuel warns that the vagaries of Meta’s accounting treatment may lead to litigation between the parties over who bears the loss if AI fails to meet expectations and Meta chooses not to renew the lease. Blue Owl finances an Oracle data center in similar fashion, but that bond is trading at a discount to Meta’s, partly because Oracle doesn’t back it and partly because the ultimate tenant is less financially stable OpenAI.
“When we rate data centers, to some extent we look at the credit quality of the ultimate tenant,” says Victor Leung, vice president for project finance at ratings firm DBRS Morningstar.
This type of complexity led Quinn Emanuel to warn in its March 13 memo that, “the AI data center buildout—projected to require $5.2 trillion in infrastructure investment by decade’s end—has spawned complex financing structures that are generating significant litigation risk.”
Mark Koziel, CEO of the International Association of International Certified Professional Accountants and president-CEO of the American Institute of CPAs, says he would raise the issue of current accounting rules for such financing arrangements at an upcoming meeting with the Financial Accounting Standards Board. Also last month, the US Department of the Treasury said it would meet with industry and investor representatives to discuss private credit’s potential risk to the financial system.
Thus far, warnings of a private credit meltdown seem overstated.
Credit funds focused on asset-backed finance (ABF), which is based on the value of a borrower’s assets and is the fastest-growing sector in the market, are relatively immune to stress, thanks to their self-liquidating feature. In contrast to direct loans, principal on asset-backed financings is paid back during the life of the loan. As a result, ABF funds don’t face the same refinancing risk as direct lenders.
Sponsors of direct lending funds “don’t have the benefit of those cash flows directed to pay down the loans,” notes Fitch’s Margolies.
Apart from First Brands’ receivables deal with Jefferies, the ABF segment has yet to be fully tested. But a test may soon be underway: Beignet is also asset-backed. Or sort of.
Debt principal remains outstanding at each renewal point, so it isn’t completely self-amortizing. As a result, DBRS Morningstar’s Leung notes, “you face a risk that your facility will lose its source of revenue.” Hence, Meta’s guarantee that it will make up any loss facing investors if it fails to renew the lease and the facility’s residual value falls below a certain threshold.
That scenario is not far-fetched, Quinn Emanuel warns, noting that it’s expensive to convert an AI data center to general-purpose cloud computing or other uses: “If demand for AI computing contracts, these facilities may function as stranded assets with limited alternative use and depressed liquidation value.”
Top Gear was suspended before the BBC announced in November 2023 that it would not be returning “for the foreseeable future” but now insiders say it is returning
At its peak on BBC Two, it enjoyed audiences of around 7.5million and spawned multiple books, DVDs and a tour. (Image: BBC/Justin Leighton)
Four years after the horror crash that saw Freddie Flintoff suffer life-changing injuries, the car show Top Gear is being brought back by the BBC according to insiders.
In 2022, Freddie’s life was changed after a car crash while filming BBC1’s Top Gear at Dunsfold Aerodrome in Surrey left him with devastating facial injuries. He underwent extensive reconstructive surgery led by maxillofacial surgeon Mr Jahrad Haq. Freddie is believed to have been paid £9million compensation.
The popular series was suspended before the BBC announced in November 2023 that it would not be returning “for the foreseeable future”. However, Prime Video has since announced a reboot of The Grand Tour, the motoring show hosted by Clarkson, May and Hammond after they left Top Gear.
A new presenting team will replace former hosts Andrew Flintoff, Paddy McGuinness and Chris Harris. BBC Studios has already started work on the reboot, which could be aired next year — half a century after the show launched in 1977.
An insider told The Sun: “BBC bosses are keen to revive Top Gear because they have never filled the space it left behind and so many viewers hanker after a motoring show. And it’s not just in Britain that the programme is much loved, it is a brand in its own right and watched by millions around the globe.
“Which is why it wasn’t just important to satisfy the needs of petrolheads, but also, specifically, fans of Top Gear. They’ll be thrilled to hear it is returning.”
The search is already under way for new presenters for the show.
Hosts over the years
The show’s most successful period came with Jeremy Clarkson and the little-known Richard Hammond and James May — plus the mysterious Stig — from 2002 to 2015.
There was a brief period from 2016 when DJ Chris Evans and Friends star Matt LeBlanc took over. Then in 2019, former England cricket captain “Freddie” Flintoff and comedian Paddy signed up to present alongside motoring expert Chris.
While the BBC insider said the show “is returning” the Beeb and BBC Studios, who produce the show, said they had no updates on whether the show was returning.
A spokesman for BBC Studios said: “The Top Gear brand continues to thrive across digital, publishing, and global formats. As a commercial producer, we’re always exploring new ways to develop the brand and reach audiences by leveraging such iconic IP.”
May 4 (UPI) — At least three people were killed and more than 38 others were injured during a monster truck show in the city of Popayán, southwestern Colombia, after one of the vehicles lost control and struck part of the audience, local authorities reported.
According to footage shared on social media and reports from Colombian outlets such as El Tiempo, the vehicle veered off the track following a maneuver, knocked down metal safety barriers and crashed into spectators.
#MNTV II ¡TRAGEDIA EN ESPECTÁCULO! Monster Truck deja 3 muertos y 37 heridos en Colombia
Uno de los vehículos perdió el control, salió de la pista y atravesó las barreras de seguridad, generando pánico entre los asistentes.
Popayán Mayor Juan Carlos Muñoz confirmed the preliminary toll in a message posted on X.
“We deeply regret the accident …)which has, preliminarily, left more than 38 people injured and 3 dead,” he said.
Among those killed was reportedly a minor, according to local press reports. Several of the injured were also believed to be children.
Colonel Julián Castañeda, commander of the Popayán police, told El Tiempo that the crash was likely caused by a mechanical failure.
“It was a private event. There was a mechanical failure, it left the track. The vehicle accelerated, it could not be stopped,” he said. He added that the driver of the truck was injured but is in stable condition.
Local media identified the driver as Sonia Dilma Segura, who is reportedly the only woman in Latin America authorized to operate this type of vehicle.
Cauca Gov. Octavio Guzmán expressed condolences and said the injured were taken to public hospitals in the city. “We deeply regret the accident,” he said on X.
A local official cited by Colombian media said the event had the required permits, including liability insurance, and that the organizing company had experience in this type of show.
April 29 (UPI) — Two people are dead and 10 are injured after a small plane crashed into a hangar Wednesday at an airport in Adelaide, South Australia.
News.com.au reported that the two people killed were in a Diamond DA42 two-engine plane, while one person who’d been in the hangar sustained life-threatening injuries, two were in serious condition, six others had smoke inhalation and one sustained minor injuries.
The plane burst into flames after it crashed at Parafield Airport, the BBC reported. Photos of the scene showed a large plume of black smoke rising from the area, and other witnesses reported seeing the plane struggling overhead before the crash.
The Australian Transport Safety Bureau has started an investigation into the incident.
South Australian Premier Peter Malinauskas said on social media that the fire had been extinguished and the airfield was closed.
He said his “thoughts are with the families and loved ones of those who have passed away, and with everyone affected by this devastating event,” the BBC said. He also thanked first responders for their response.
The airport has several flight training schools and has a large amount of aircraft traffic. News.com.au said the plane involved was used for student training, but Chief Inspector Andrew McCracken could not say if the pilot Wednesday was a student.
In January, a student pilot crashed during takeoff at the airport, but although the plane caught fire, the pilot escaped unharmed.
1 of 2 | Two trains collided between Hilleroed and Kagerup at Isteroedvejen, Denmark, Thursday morning. At least 19 are injured. Photo by Steven Knap/EPA
April 23 (UPI) — Two passenger trains crashed head-on in Denmark on Thursday leaving 18 injured, five of them critically, law enforcement officials said.
The trains collided at 6:29 a.m. CEST, traveling on a line that connects Hillerød and Kagerup in the North Zealand region of northeast Denmark. Hillerød is about 19 miles from Copenhagen. There were 37 people aboard. North Zealand police said the trains were traveling fast, but the exact speed wasn’t known.
No cause of the crash has been determined, said Tim Ole Simonsen of the Greater Copenhagen Fire Department, but he told Danish TV that all the injured were taken to the hospital by either ambulance or air.
“I am deeply shaken and shocked, and my thoughts are with all those involved,” Gribskov Mayor Trine Egetved posted on Facebook. “The local track is used by many Gribskov citizens, employees and pupils. Emergency services are working at full pressure, and we are trying from the central team to get an overview of what has happened more accurately and make sure that everyone gets the help they need.”
Fire and rescue service leader Christoffer Buhl Martekilde told reporters, “The two trains collided head-on, causing large damage to them and sending broken glass flying everywhere.”
North Zealand Police Inspector Morten Pedersen said his agency will work with Denmark’s Accident Investigation Board to find out what happened, the BBC reported.
Klaus Jensen, accident board manager, told TV2 that investigators were exploring “all hypotheses,” including “a failure in the signalling system or whether there may have been a failure due to human factors,” the BBC reported.
Several train staff were injured, said Claus Pedersson, safety director at Lokaltog, the Danish railway company, to Danish broadcaster DR.
He said the crash was “one of the worst we can imagine in the railway industry.”
“We see accidents like this happen from time to time, and the most important thing is that we learn from it,” Pedersson said.
Danish Prime Minister Mette Frederiksen said in a statement that she was “very moved by the terrible train accident on the Gribskov line this morning.” She told TV2, “Several people are in a critical condition. My thoughts go out to the injured, their relatives and everyone affected by the accident.”
Swedish Prime Minister Ulf Kristersson said he offered help for the incident response, but Danish police declined the offer.
April 20 (UPI) — A Southwest Airlines flight arriving at Nashville International Airport over the weekend was directed into the path of another Southwest flight that was taking off, causing them to pass within 500 vertical feet of each other.
A flight arriving from Myrtle Beach, S.C., on Saturday evening initiated a go-around before landing because it was facing “gusty winds” during it’s approach, but air traffic controllers directed the crew into the path of another flight, USA Today, WSMV and WTVF reported.
The other flight was departing NIA on a parallel runway, which caused the close call, and “both flight crews responded to onboard alerts” because the two aircraft were 500 feet apart, the Federal Aviation Administration said in a statement.
Five hundred feet is equivalent to 1 2/3 football fields, including the end zones, or two Boeing 747s lined up nose-to-tail, which is half the 1,000-foot distance the FAA requires aircraft to maintain.
The air traffic controller who gave the errant order recognized the mistake and corrected himself with both flight crews, who had already responded to alerts from their Traffic Collision Avoidance System, devices that are standard on all commercial aircraft.
“We are engaged with the FAA as part of the investigation,” Southwest said in a statement.
“Southwest appreciates the professionalism of its Pilots and Flights Crews in responding to the event,” the company said. “Nothing is more importing to Southwest than the Safety of our Customers and Employees.”
Secretary of Health and Human Services Robert F. Kennedy, Jr. speaks during a House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies hearing on the budget for the Department of Health and Human Services in the Rayburn House Office Building near the U.S. Capitol on Thursday. Photo by Bonnie Cash/UPI | License Photo
April 20 (UPI) — Two employees of the U.S. Embassy in Mexico and two Mexican law enforcement officers were killed in a car crash over the weekend while returning from an operation to destroy laboratories in the northern state of Chihuahua, officials said.
The four people were traveling in a vehicle when they skidded off the road and into a ravine at about 2 a.m. Sunday, Chihuahua Attorney General Cesar Jauregui Moreno told reporters in a press conference.
He identified the deceased as Agency Director Pedro Roman Oseguera Cervantes and officer Manuel Genaro Mendez Montes of the Chihuahua State Investigation Agency and two instructor officers from the U.S. Embassy, whose names have not been made public.
“From here, we extend our deepest condolences and wish peace and resignation to the families of those who died in this unfortunate accident,” he said.
U.S. Ambassador Ronald Johnson to Mexico offered his condolences online.
“We honor their dedication and tireless efforts to confront one of the greatest challenges of our time. Our thoughts and prayers are with them and their loved ones,” he said in a statement.
“This tragedy is a solemn reminder of the risks faced by those Mexican and U.S. officials who are dedicated to protecting our communities. It strengthens our resolve to continue their mission and advance our shared commitment to security and justice, to protect our people.”
The incident occurred as they were returning from an operation that destroyed six clandestine laboratories in the municipality of Morelos, where Jauregui said synthetic drugs were being produced.
The site was located following a three-month investigation and destroyed on Friday and Saturday.
“It is one of the largest sites found in the country where chemical drugs were being produced,” Jauregui said during the press conference.
Alex Manninger played for Arsenal, Liverpool and Juventus at peak of his career while winning 33 Austria caps.
Published On 16 Apr 202616 Apr 2026
Former Austria goalkeeper Alex Manninger, who played for Arsenal and a string of Italian clubs, has died at the age of 48 when the car he was driving was hit by a train at a crossing near Salzburg.
The Austrian Football Association (OEFB) and clubs associated with the player, who retired as a professional in 2017, mourned his passing on Thursday.
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Manninger made 33 appearances for Austria and played for Arsenal from 1997 to 2001 with the club winning the league title and FA Cup in the 1997-1998 season. He ended his career at Liverpool in 2017.
In Italy, the Austrian played for Fiorentina, Torino, Bologna, Siena, Udinese and Juventus.
“Alexander Manninger was an outstanding ambassador of Austrian football on and off the pitch,” OEFB Sporting Director Peter Schoettel said in a statement.
“With his international career, he has set standards and inspired and shaped many young goalkeepers. His professionalism, his calmness and his reliability made him an important part of his teams and also of the national team.”
Salzburg police said in a statement that the accident happened about 8:20am (06:20 GMT). First responders freed the driver from the vehicle, but resuscitation was unsuccessful.
“According to initial investigations, the car was hit by a railcar of the Salzburger Lokalbahn while crossing the railway crossing and dragged along. The driver was alone in the vehicle. The train driver was uninjured,” the police said.
Fiorentina said they will observe a minute’s silence and wear black armbands for Thursday’s home Conference League game with Crystal Palace while league leaders Arsenal conveyed their shock on social media.
Other clubs, including Liverpool, issued statements of condolence.
“Today is a very sad day. We have lost not only a great athlete, but a man of rare values: humility, dedication, and an exceptional sense of professionalism,” Juventus said
“Alex Manninger will be remembered for the example he set, on and off the pitch.”
