UBS Group AG has raised its private credit default forecast, with its strategists warning that losses could reach as high as 15% in a worst-case scenario, up from 13% just weeks ago, according to a report by Bloomberg.
The bank said the increase reflects growing fears that rapid artificial intelligence disruption could trigger severe stress among corporate borrowers. Technology companies, in particular, are seen as highly vulnerable to AI-driven upheaval.
Current default levels in private credit are estimated at 3%–5%, but signs of strain—such as rising interest paid-in-kind (PIK) loans—are approaching post-pandemic highs. UBS highlighted that a sector-specific shock could lead to cascading defaults across the market.
The warning follows recent turbulence in the private credit industry, including Blue Owl Capital restricting investor withdrawals from one of its funds, and broader investor concerns over AI-driven economic shifts. Analysts caution that the combination of technology disruption and concentrated exposure in direct lending could pose heightened risks to private credit portfolios.
