Rating agency DBRS Morningstar indicated that the proportion of credit rating downgrades reached a new high in February, reflecting a continued deterioration in private credit quality this year. The number of downgrades this month was 3.3 times that of upgrades, up from 2.4 times during the same period last year. Michael Dimler, Senior Vice President of Private Credit Ratings at Morningstar, stated in an interview on Monday that the rating outlook for 2026 remains skewed to the negative, given squeezed profit margins across various industries and rising debt levels. DBRS Morningstar provides private credit rating services for approximately 450 mid-market borrowers in North America and Europe, with these companies averaging annual revenues of $250 million. While DBRS Morningstar is monitoring the potential disruption risks posed by artificial intelligence (AI) to software companies, Dimler noted that the impact of AI on these firms' ratings is not yet significant. He compared the current changes to the transition a decade ago when software shifted from physical distribution to cloud and subscription models. "Software developers' performance was indeed affected for a few years, but companies that made the necessary investments eventually completed the transition and improved their profitability afterward," he said.
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