AI Threatens Private Debt Recovery in Software: Davidson Kempner
Davidson Kempner Capital Management LP's chief investment officer Tony Yoseloff warns that AI disruptions threaten private credit firms' recovery rates in the software sector. The average recovery in first-lien debt over the past five years was below 40 cents, with software businesses likely to fare worse due to lacking hard assets.
Tony Yoseloff, chief investment officer of Davidson Kempner Capital Management LP, expressed concerns about the impact of artificial intelligence on private credit firms' recovery rates in the software sector at the Milken Institute Global Conference. Yoseloff stated 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. According to Yoseloff, AI disruptions are threatening private credit firms' potential recovery rates in the software sector.
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