Morningstar DBRS says that the proportion of downgrades in February hit a record high, and the quality of private credit continues to deteriorate.

Credit rating agency Morningstar DBRS pointed out that the proportion of credit rating downgrades in February hit a record high, indicating a continued deterioration in the quality of private credit this year. The number of rating downgrades this month is 3.3 times higher than the number of upgrades, higher than the 2.4 times during the same period last year. Dimler, Senior Vice President of Morningstar's private credit rating, said in an interview on Monday that due to profit margins in different industries being squeezed and debt levels rising, the rating outlook for 2026 remains negative. Morningstar DBRS provides private credit rating services for approximately 450 mid-market borrowers in North America and Europe, with an average annual income of $250 million. Morningstar DBRS is concerned about the disruptive risks that artificial intelligence poses to software companies, but Dimler pointed out that the impact of AI on the ratings of these companies is not yet clear. He compares the current changes to the period 10 years ago when software developers transitioned from physical issuance to cloud-based and subscription models. "The performance of software developers did indeed suffer for a few years, but those companies that made investments ultimately completed the transformation and improved their profitability afterward," he said.