JPMorgan Cuts Loans to Private Credit Funds Over Software Risk

JPMorgan has tightened its lending rules for private credit groups, trimming the value of certain loans that these funds use as collateral. The bank’s move signals growing caution among traditional lenders toward the fast‑growing private credit market, especially when backing software companies that may feel the pressure of new AI technologies. The decision means JPMorgan will provide less money to private credit funds based on the devalued loans. This action follows comments from CEO Jamie Dimon, who said the bank is being more careful with software assets. Co‑CEO Troy Rohrbaugh added that volatility in the world makes such a shift expected, and he expressed surprise at others’ reactions. Private credit executives say JPMorgan’s new stance is unique; other banks have not taken similar cuts. A fund manager noted that the bank has rarely been reluctant to extend leverage, making this a first sign of hesitation. The changes were made before any margin calls were triggered, aiming to reduce future credit exposure.The announcement came just after the stock market reacted negatively to JPMorgan’s report. Shares of major private credit firms fell, with Ares dropping 5. 2%, KKR down 2. 7%, Blackstone 2. 1% and Apollo 2%. Investors worry that AI could disrupt enterprise software, a sector heavily financed by private lenders. Unlike public software stocks and bonds that have seen sharp declines, private credit loans are often held to maturity. These lenders claim the businesses they fund still grow and that their loans will perform, supported by investor backing. The private credit industry has benefited from bank leverage and large capital inflows, allowing it to compete with banks on big leveraged buyouts. JPMorgan’s ability to revalue assets at any time sets it apart from other banks, which usually wait for triggers like missed payments. Private credit funds can challenge such marks through long valuation processes, but the bank’s decision stands until a new assessment is made. The bank considers individual loan details and broader economic conditions, using public proxies and private trades to inform its valuations.