Artificial intelligence may be creating a new fault line in leveraged finance, with PIMCO warning that the technology could erode the software business models underpinning billions of dollars in private credit and leveraged loan deals.
In its latest "Credit Market Lens" analysis, the asset manager said AI is beginning to challenge assumptions underpinning many software-backed leveraged buyouts and private credit deals. While higher interest rates and weaker underwriting remain key headwinds, PIMCO said AI adds a new layer of risk that could pressure credit performance even without a broader economic slowdown.
