That would be bad.
From Bloomberg via Canada's Financial Post, February 25:
Fears of such an event have been building in recent days
A few weeks ago, analysts at UBS Group AG laid out a worst-case scenario for defaults in the private credit sector. Their outlook is even more grim now.
Strategists including Matthew Mish now say private credit could see default rates surge as high as 15 per cent, two percentage points more than a forecast the firm published less than a month ago.
The initial report had warned that direct lenders could face a 13 per cent default rate if artificial intelligence triggers an “aggressive” disruption among corporate borrowers, but that view became even more bearish in recent weeks as fears about AI upending the U.S. economy deepened.
“What is new: a clearer catalyst — rapid, severe AI disruption,” said the report published on Tuesday....
....MUCH MORE
The general rule of thumb, since the days of Michael Milken and probably back to the Venetians, has been that the interest paid should at minimum match your expected default rate and a quick survey shows no one is offering even 10% for the use of your money, much less 15%.
Cascading defaults are the moneylender's nightmare.
