Morgan Stanley: Private Credit Defaults to Hit 8% Amid AI Software Disruption

• Morgan Stanley forecasts private credit default rates to reach 8% due to AI disruption in the software industry.
• Elevated leverage and looming maturity walls within the software sector are key drivers, pushing defaults to near pandemic-era peaks.
• Software loans exhibit the highest leverage and lowest coverage ratios across major sectors, making them vulnerable.
• Significant maturity wall for software loans: 11% due in 2027, 20% in 2028, according to PitchBook data.
• Increased redemption requests in private credit funds, with Morgan Stanley and Cliffwater LLC capping withdrawals.