Bank’s software-loan markdowns signalled a tougher backdrop for highly leveraged lenders
JPMorgan Chase has tightened the screws on private credit lenders, marking down loans to software companies and curbing how much the funds could borrow against them, according to people familiar with the matter.
The step signaled that the largest US bank by assets wants to get ahead of mounting concerns over portfolios tied to software borrowers exposed to artificial intelligence.
The markdowns sit in JPMorgan’s financing business, where private credit firms borrow to boost returns through so‑called back‑leverage.
The bank’s Wall Street division reduced the value of loans, most of which were made to software firms, in the financing portfolios of private credit clients, one person with knowledge of the interactions said.
A pre‑emptive squeeze on leverage
By cutting valuations on the collateral backing those facilities, JPMorgan reduces the amount of credit available to the funds and, in some cases, could have forced them to post extra collateral.
One person briefed on the decision said the valuation haircuts did not trigger margin calls but were taken to pre‑emptively shrink lending lines.
JPMorgan is “being more prudent in lending against software assets,” chief executive Jamie Dimon told investors at the bank’s leveraged finance conference last week, according to two people briefed on the closed‑door meetings.
Troy Rohrbaugh, co‑chief executive of the commercial and investment bank, already told analysts the firm is becoming more conservative than peers on private credit risk.
One private credit head said JPMorgan “had been more difficult the past three months” on back‑leverage and that the bank rarely got “rattled and this is the first time we’ve had a little issue.” JPMorgan declined to comment.
AI “SaaSpocalypse” meets a $2 trillion market
The loans under pressure are to software companies viewed as vulnerable to rapid AI‑driven disintermediation, as model updates from providers such as OpenAI and Anthropic intensify scrutiny of enterprise software business models.
Publicly traded software stocks and related debt slumped this year, while private lenders, who typically hold loans to maturity, have not marked portfolios in lockstep.
The private credit industry mushroomed into a market widely estimated at around $2 trillion or more in recent years.
Regulators and rating agencies warned that bank lending to non‑bank credit funds have grown quickly, even as large US banks argued that direct exposures remain manageable.
The latest move landed just as several large alternative managers contend with heavy redemption requests and markdown pressure in software‑linked vehicles, and as at least one Wall Street rival limited withdrawals at a private credit fund after they breached a 5% quarterly threshold.
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