Key Takeaways
- • Moody's expects capital spending by the five largest US hyperscalers plus CoreWeave to approach $1 trillion in 2027, with private credit increasingly financing the full AI supply chain from land and power to chips and GPUs.
- • Moody's warns that loans maturing in 2027-2029 could test weaker borrowers if borrowing costs remain above the ultra-cheap rates at which many deals were struck.
- • Reuters found US business development company (BDC) loan maturities peaking in 2028 and 2029, concentrating refinancing risk in the same window.
- • 17% of the 607 borrowers Moody's tracks use payment-in-kind (PIK) interest, which defers cash payments but enlarges the balance due at maturity.
- • Moody's cites stress in CoreWeave's debt as an early indicator that highly leveraged, AI-linked borrowers may face the first refinancing pressure.
Summary
Moody's says the rush to fund AI infrastructure is drawing private credit deeper into technology, and that a refinancing wave in 2027-2029 could reveal which borrowers cannot roll their debt at current interest rates. According to the ratings agency, AI funding has moved beyond data center construction to encompass the entire supply chain, including land, power, chips and graphics processing units (GPUs). Moody's expects capital spending by the five largest US hyperscalers, the large cloud operators that run massive data centers, together with CoreWeave, an AI-focused cloud provider, to approach $1 trillion in 2027. Part of this is conventional corporate borrowing, but a growing share flows through joint ventures and special-purpose vehicles, structures that ring-fence projects and have helped private credit expand into tech.
The central risk is timing. Moody's warns that loans maturing in 2027-2029 will test weaker borrowers if borrowing costs stay higher than the ultra-low-rate environment in which many deals were originally priced. Reuters separately found that US business development company (BDC) loan maturities peak in 2028 and 2029, placing a concentration of refinancing needs in the same window.
Payment-in-kind (PIK) interest adds a further dimension. Moody's data shows 17% of the 607 borrowers it tracks use PIK, under which interest is added to the loan balance rather than paid in cash. This eases near-term cash pressure but increases the amount that must be refinanced at maturity, creating a larger balloon payment. The key question for investors is whether borrowers can refinance a larger balance if lenders remain cautious and loans are priced off higher base rates.
For BDCs and other private-credit holders, the resulting volatility could appear as renegotiations, write-downs and net asset value swings. Moody's pointed to stress in CoreWeave's debt as an example of where strain often emerges first: highly leveraged, AI-linked borrowers that depend on favorable refinancing terms.
The central risk is timing. Moody's warns that loans maturing in 2027-2029 will test weaker borrowers if borrowing costs stay higher than the ultra-low-rate environment in which many deals were originally priced. Reuters separately found that US business development company (BDC) loan maturities peak in 2028 and 2029, placing a concentration of refinancing needs in the same window.
Payment-in-kind (PIK) interest adds a further dimension. Moody's data shows 17% of the 607 borrowers it tracks use PIK, under which interest is added to the loan balance rather than paid in cash. This eases near-term cash pressure but increases the amount that must be refinanced at maturity, creating a larger balloon payment. The key question for investors is whether borrowers can refinance a larger balance if lenders remain cautious and loans are priced off higher base rates.
For BDCs and other private-credit holders, the resulting volatility could appear as renegotiations, write-downs and net asset value swings. Moody's pointed to stress in CoreWeave's debt as an example of where strain often emerges first: highly leveraged, AI-linked borrowers that depend on favorable refinancing terms.
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