Private Credit Faces Test as Liquidity Declines, Says Moody’s

The fast-growing $1.5 trillion private credit market is set to face its “first test,” with tightening financial conditions potentially leading to more defaults and weaker recovery rates, according to a report by Moody’s Investors Service.

Rising interest rates, stalling economic growth and less capital flocking to risk assets could lead to some private credit managers struggling, according to the ratings agency. Larger funds with longer track records and strong private equity relationships will be able to ride out the stresses in this new macro environment better, Moody’s said in its report assessing the impact of declining liquidity on private credit’s ...