AI Threatens Private Debt Recovery in Software: Davidson Kempner

Disruptions caused by artificial intelligence are threatening private credit firms’ potential recovery rates in the software sector, according to Davidson Kempner Capital Management LP chief investment officer Tony Yoseloff.

“My real concern is in recovery value in these assets,” Yoseloff said at the Milken Institute Global Conferenceon Monday, adding that the average recovery in first-lien debt over the past five years was already below 40 cents. Software businesses are likely to fare even worse because they lack hard assets to support valuations once performance deteriorates, he said.

Tony Yoseloff

Photographer: Lam Yik/Bloomberg

Private equity sponsors — the mainstay of private credit lending ...