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Bloomberg


The Credit Edge reviews the top credit news of the week and looks at the week ahead, with in-depth research of the most important corporate sectors, trends and themes. Analysis of specific corporate bonds and credit default swaps is backed by Bloomberg Intelligence's robust data sets and indexes.


The Credit Edge by Bloomberg Intelligence

Blue-chip companies, including hyperscalers, may be jeopardizing their credit ratings by piling on debt, according to Principal Asset Management. “We have seen some downgrades, and I would expect that that would continue as borrowing ramps up,” Mike Goosay, the $600 billion manager’s global head of fixed income, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Julie Hung on the latest Credit Edge podcast. “I don’t think that’ll have a behavioral effect on the way that investors look at the market, nor does it — to date, anyway — change the borrowing costs of those corporates,” he adds. They also discuss the artificial-intelligence funding frenzy, why junk bonds are attractive despite macroeconomic risks and how global government-bond volatility affects demand for credit.

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Principal Sees High-Grade Downgrade Risk as Issuance Ramps Up

Loose underwriting standards are increasingly troubling for private credit market participants, according to Bloomberg Intelligence. “This concern has been growing for a period of time,” David Havens, BI’s senior analyst for private credit, tells Bloomberg News’ James Crombie in this special episode of the Credit Edge podcast. Weak underwriting discipline was flagged by private debt market participants in a recent global BI survey, rising in prominence compared with a poll conducted in September. In addition, direct lenders face lingering pressure from retail redemptions at business development companies. “Headlines are still going to be negative, focused on that very small portion of the market — it’s becoming slightly infectious and weighing on the wealth side of the business,” says Paul Gulberg, a senior analyst who covers global banks and asset managers. The trio also discuss the drivers of private credit growth, loan valuations, the liquidity premium and fund fees.

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Private Credit Has a Weak Underwriting Discipline Problem

JPMorgan Asset Management sees value in the debt of companies building out AI, but it’s keeping a close eye on how much more they plan to spend next year. “If we’re seeing capex increase at the same rate that we saw 2025 to 2026, I think that’s probably a little bit of a red flag,” Stephanie Doyle, a portfolio manager at the $4.3 trillion firm, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Arnold Kakuda in this episode of the Credit Edge podcast. “I think the issuance is an opportunity,” said Doyle, who’s part of the money manager’s global fixed income, currency and commodities team. They also discuss the potential for credit spreads to tighten, rising net new bond issuance, the earnings outlook and growing macro risks.

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JPMorgan Is Wary of Another Big Leap in AI-Related Spending

Secondary trading of private credit is on track to more than double last year’s record volume, according to HarbourVest Partners. “Through the first quarter we’re run-rating above $50 billion this year,” Greg Ciesielski, the $150 billion global private markets firm’s head of credit secondaries, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Jean-Yves Coupin in this episode of the Credit Edge podcast. “It’s certainly a buyer’s market at the moment, which is what you generally see in dislocation,” he adds. They also discuss the impact of private credit stress on pricing, opportunities to buy assets from business development companies and how HarbourVest uses AI for valuation.

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HarbourVest Expects Private Credit Secondaries Volume to Double

Rookie private lenders that have to sell in a downturn are a potential threat to credit markets, according to Citi. “If the cycle turns and these tourists, rather than working out loans, just start selling them at below the economic value — what happens to the rest of the market?” Mickey Bhatia, the firm’s head of spread products, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Sam Geier in this episode of the Credit Edge podcast. “That’s a big worry,” says Bhatia. They also discuss global fund flows, investment in AI infrastructure and expansion of electronic trading to incorporate collateralized loan obligations.

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Citi Warns of Private Debt Risk as ‘Tourists’ Are Forced to Sell

Middle East shipping disruptions are boosting US companies bruised by cheap Chinese supply, according to Sycamore Tree Capital Partners. “It really slows down the ability for some of those Asian-based chemical companies to produce,” Trey Parker, the asset manager’s co-founder and chief investment officer, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Phil Brendel in the latest Credit Edge podcast. “You’re going to have more US- and European-based chemical companies have an inherent advantage,” Parker added. They also discuss health-care relative value, the outlook for debt defaults, a slowdown in liability management exercises and opportunity in credit secondaries.

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Sycamore Tree Tips Chemicals in Iran Jam

US companies with $770 billion in loans are hitting a wall as interest rates stay elevated, according to Davidson Kempner. “We’re in year three of what’s already the longest default cycle in 20 years,” Suzy Gibbons, the hedge fund’s head of research, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s David Havens in the latest Credit Edge podcast. “About a third of the market is stressed based on fundamental credit data,” she said. They also discuss liability management exercises, software defaults, distressed-debt returns and the broader impact of leveraged-debt stress on markets.

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Davidson Kempner Sees a $770 Billion Stressed Debt Opportunity

A retail exodus from business-development companies has dragged their debt to levels that are starting to look attractive, according to MFS Investment Management. “Pressure for redemptions that they’re facing likely ends up creating some opportunities within the public credit markets,” Alex Mackey, the firm’s co-chief investment officer for fixed income, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Robert Schiffman in the latest Credit Edge podcast. “You can line up all the public and the private BDCs and you can go through and see which ones have the leverage metrics that are most attractive,” said Mackey, whose firm oversees $622 billion in assets. They also discuss the deluge of technology sector debt issuance and how wide credit spreads would have to go before they’d look attractive.

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BDC Bond Bust Creates Opportunity for $622 Billion Asset Manager MFS

Business development company turmoil is making direct lenders cautious on corporate debt risk, according to PGIM, which oversees more than $200 billion in private credit. “It’ll have a bit of a chilling effect,” Matt Harvey, the firm’s global head of middle-market direct lending, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Matthew Geudtner in the latest Credit Edge podcast. “As a lender you’re a little bit more conservative, you’re a little bit more rational in terms of your view on how to structure the asset, how to price it,” Harvey says. They also discuss default rates, loan marks, the consumer staples sector and relative value in European direct lending.
 
 

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PGIM Sees 'Chilling Effect' on Private Credit From BDC Storm

The plunge in software debt creates opportunities to buy cheap loans from companies that will survive AI disruption, according to Permira Credit. “The market has overreacted,” Ian Jackson, the firm’s head of strategic opportunities, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Tolu Alamutu in the latest Credit Edge podcast. “The broad selloff in software has been such an interesting place for us because a lot of these names, we just don’t believe will go through restructuring,” says Jackson, whose company lends to technology companies. They also discuss fraud, private market stress, relative value in Europe vs. US credit and the outlook for collateralized loan obligations.

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HarbourVest Expects Private Credit Secondaries Volume to Double

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