JPMorgan marks down value of loan portfolios of some private credit groups, source says

By Angela Christy M and Rajveer Pardesi

March 11 (Reuters) – JPMorgan Chase has marked down the value of certain loans held by private-credit groups, a person close to the bank said on Wednesday, as investor worries mount for the $2 trillion industry over deteriorating credit quality.

The Financial Times, which first reported the news on Wednesday, said the markdowns apply to loans made to software companies.

Private credit has been marred by concerns about deteriorating credit quality and exposure to the software sector – an industry seen as ripe for disruption by advances in artificial intelligence.

The remarking of loans does not happen often, but this isn’t the first time the bank has remarked loans, the person told Reuters.

The source added that remarking was “important to do when markets warrant it rather than waiting for a crisis to come along.”

JPMorgan declined to comment. Its shares were down about 0.5% in morning trading.

Shares of private-credit firms were also down. Ares declined 4.5%, while Blue Owl, KKR, and Carlyle fell about 2.6%.

INVESTOR WITHDRAWALS

Private credit refers to loans issued by non-bank lenders, typically to riskier borrowers or companies funding large buyouts.

While these loans can be arranged quickly and serve borrowers too risky for banks, rising concerns over credit quality and exposure to software firms vulnerable to AI disruption are clouding the fast-growing market.

The industry has seen a wave of investor withdrawals this year on fears of potential defaults by software companies.

Last week, BlackRock said it limited withdrawals from a flagship debt fund after a surge in redemption requests, while Blackstone disclosed that its private credit fund, known as BCRED, faced a surge in withdrawals in the first quarter.

Private credit has also been hit by questions over valuation and transparency, with concerns about Blue Owl replacing client redemptions with promised payouts, and the exposures of some players last year to the bankruptcies of a U.S. auto parts supplier and a subprime auto lender.

JPMorgan CEO Jamie Dimon told investors at the bank’s leveraged finance conference last week that it was being more prudent in lending against software assets, the Financial Times added, citing two sources.

(Reporting by Rajveer Singh Pardesi in Bengaluru, additional reporting by Utkarsh Shetti; Editing by Rashmi Aich and Saumyadeb Chakrabarty)