Private credit borrowers that loaded up on debt when interest rates were low could face refinancing pressure as they approach maturity, according to investors speaking at a forum in Singapore on Thursday.

Loans borrowed in 2021 and 2022 are particularly vulnerable to refinancing risks because they were underwritten at a time when base rates were close to zero, said Steve Kuppenheimer, partner and head of private investments at Lord, Abbett & Co. These older facilities could come under greater stress and face a higher risk of default as they approach maturity, he said on a panel at the Milken Asia Summit 2026. “I do think that we’re in a little bit of an elevated default cycle right now,” Kuppenheimer said, adding that default levels are hovering around 3%-4%, above the historic average of 2%.

The warning comes as strain continues to burden the $1.8 trillion private credit industry.

Such funds, particularly in the US, have been under intense scrutiny since the start of the year. Parts of the sector have suffered outflows amid broader concerns about debt quality, as well as growing fears that many funds are overly exposed to software companies that could be disrupted by advances in artificial intelligence. The collapse of UK non-bank finance firm Market Financial Solutions Ltd. earlier this year left banks nursing potential losses amid allegations of financial irregularities.

That followed defaults at US auto parts supplier First Brands Group and subprime lender Tricolor Holdings in the second half of 2025, which raised fresh doubts about underwriting standards and risk controls in the asset class. In Australia, the corporate regulator on Thursday temporarily banned three more private credit products from being offered to investors, its latest move in a broader drive to address risks in unlisted markets.

Some sectors could face more refinancing pressure given the rising interest rate environment, and because asset values have fallen relative to debt levels, said Brigitte Posch, partner and co-head of Asia Pacific Credit and Hybrid at Apollo Global Management.

Some loans could potentially be repaid in full through the sale of the underlying asset, but creditors have limited control over when a private equity owner chooses to exit, said Andrew Konopelski, managing partner at Bridgepoint Credit.

“The question is, how do you get your money back?”Konopelski said, pointing to the trillions of dollars of unsold private equity assets still seeking buyers.

On the flip side, the emerging stress hasn’t diminished lenders’ appetite toward the asset class. Higher base rates are producing more attractive returns, while a more uncertain environment is encouraging greater discipline around underwriting, covenants and portfolio construction, the panelists said.

Apollo has funded about $8 billion of opportunities across Asia Pacific over the past 12 months, said Posch. Looking ahead, she estimates that trillions of dollars will need to be financed over the next decade, driven by investment opportunities in sectors such as AI and digital transformation.

There continues to be good opportunities, but private credit funds need to be selective and make sure they are getting paid for the risks, said Posch.