Morgan Stanley On The Latest In Private Credit: Liquidity Stress Not Translating Into Solvency Risk

By Vishwanath Tirupattur, head of global securitized product strategy at Morgan Stanley

Private Credit: Pressures Contained, Not Resolved

When we last addressed private credit in the Sunday Start, the noise was loud: redemption requests across private BDCs and semi-liquid private credit funds were rising; public BDCs (the market’s visible proxy) were trading at meaningful discounts to NAV; and software exposure facing potential AI-driven disruption had emerged as a clear fault line. We argued that credit risks in private credit were significant but not systemic, framing the volatility earlier this year as a reset in pricing and sentiment rather than the beginning of a disorderly credit unwind with broad systemic consequences. As we enter Q2 earnings, the decibel level has eased, but the chatter has not disappeared. In this week’s Start, we reassess the landscape to see what has changed and what has not, mark our thesis to market, and consider how AI-driven disruption may continue to shape outcomes within private credit, particularly in the software sector.