JPMorgan Chase has marked down the value of certain loans tied to software companies that are held by private-credit groups, a move that is drawing fresh attention to potential strains in the fast-growing $2 trillion private lending industry.
The markdowns, first reported by the Financial Times, which cited a person familiar with the matter, highlight rising concerns about the creditworthiness of borrowers in sectors that have long been a cornerstone of private-credit portfolios.
According to the source, the valuation adjustments apply to loans extended to software companies, a segment that private lenders have heavily financed over the past decade because of its recurring revenue models and perceived resilience.
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Loan remarking — the process of revising the valuation of loans to reflect changing market conditions — does not occur frequently, but the person said it is a necessary step when underlying risks begin to shift.
“This isn’t the first time the bank has remarked loans,” the source said, adding that the process is “important to do when markets warrant it rather than waiting for a crisis to come along.”
The move comes as investors increasingly question the stability of the private credit market, which has expanded rapidly since the global financial crisis as stricter regulations pushed traditional banks away from riskier corporate lending.
Private credit refers to loans provided directly by non-bank lenders — including asset managers, private equity firms, and specialized credit funds — to companies that may struggle to secure financing from banks. These loans are often used to fund leveraged buyouts or to provide growth capital to mid-sized companies.
Because the loans are privately negotiated and rarely traded in open markets, their valuation can be difficult to assess, raising concerns about transparency and pricing accuracy during periods of financial stress.
The latest markdowns at JPMorgan come at a time when investor confidence in the sector is already being tested by rising interest rates, slowing economic growth, and mounting concerns about potential defaults among highly leveraged borrowers.
Software companies have been a particularly large recipient of private-credit financing, as lenders were drawn to subscription-based business models that generate predictable cash flows. However, that thesis is facing new pressure as technological shifts — including the rapid rise of artificial intelligence — threaten to disrupt parts of the software industry.
Some analysts warn that AI-driven tools could erode the market position of smaller or specialized software firms, potentially undermining the revenue streams used to service debt obligations.
The growing uncertainty has already prompted a wave of investor withdrawals from several major private-credit funds. Last week, BlackRock said it had limited withdrawals from one of its flagship private debt funds after a surge in redemption requests from investors seeking to pull money out of the vehicle.
Similarly, Blackstone disclosed that its private credit fund, known as Blackstone Private Credit Fund (BCRED), experienced a sharp increase in redemption requests during the first quarter, reflecting growing caution among investors.
The wave of withdrawal requests is highlighting one of the structural tensions within the private credit market: many funds promise investors periodic liquidity even though the underlying loans are relatively illiquid. That mismatch can create pressure on fund managers during periods of market stress, forcing them to impose withdrawal limits or delay redemptions.
The industry has also been facing broader scrutiny over valuation practices and risk exposure. Some investors have raised questions about how private-credit managers price loans that do not trade frequently, particularly when economic conditions begin to deteriorate.
Concerns have also surfaced over the practices of Blue Owl Capital, including whether some funds have used promised payouts or internal financing arrangements to manage client redemption requests. In addition, the sector was shaken last year by losses linked to several corporate bankruptcies, including those involving a U.S. auto parts supplier and a subprime auto lender, which exposed the extent of private-credit funds’ exposure to financially vulnerable borrowers.
The latest developments suggest that even large banks are becoming more cautious about the sectors that private lenders have embraced most aggressively.
At a leveraged finance conference last week, JPMorgan Chief Executive Jamie Dimon told investors the bank was adopting a more prudent approach when lending against software assets, according to the Financial Times.
His remarks signal a broader shift in sentiment as lenders reassess risk in an environment defined by higher borrowing costs and rapid technological change.
For years, private credit was viewed as one of the most resilient corners of global finance, benefiting from investors’ search for higher yields at a time when interest rates were historically low. But as financial conditions tighten and investors begin to scrutinize credit risk more closely, the sector is facing a more demanding test.
JPMorgan’s decision to mark down some of its loan exposures could therefore be seen as an early indication that parts of the private-credit market, particularly those tied to technology companies, may be entering a period of increased stress.