It was a panicked message from a colleague that woke fund manager Ivelina Green at 5 a.m. on Thursday morning in New York: “Total meltdown.”By Aaron Weinman, Josie Reich and Paula Sambo The average risk premium for US high-yield debt had climbed to a 17-month high and primary markets notched the year’s biggest spate of pulled deals. In London, Arini Capital Management, one of the biggest hedge fund investors in the high-yield market, just told investors it had lost 6.9% in the first half of October.

Parts of the high-yield market were seeing a rapid downturn, triggered by intensifying investor concerns about how the most vulnerable companies will withstand elevated inflation, rising interest rates and the business impact of artificial intelligence, all against a volatile geopolitical backdrop.

Yields on the riskiest junk borrowers, rated CCC, this week surged to their highest since the pandemic, as the spread they command over Treasuries ballooned to a four-year high. While software has been the focus for much of this year because of fears over the disruptive powers of AI, cable and satellite companies have been the biggest laggards in this portion of the market.

“The price action has been eye-watering in a lot of situations,” said Green, founder and chief investment officer of London-based credit investor Pearlstone Alternative. “Into year-end, primary markets are effectively shut. And there isn’t a lot of liquidity on the way down, so that is exacerbating the panic.”The pain underscores how credit markets have grown far trickier for the riskiest borrowers. After raising billions during a period of unusually low rates, these companies are now facing increasingly skeptical investors reevaluating their business prospects in an AI era and questioning their ability to refinance and service debt at much higher costs.

For investors, this week’s declines reinforce the importance of picking solid credits. For companies that go bad, investors might end up recovering far less than usual, said David Colla, global head of credit investments at CPP Investments, which managed more than $600 billion of assets as of June 30.

“That’s the heartache in people’s portfolios right now,” Colla said in an interview. ‘Hopeless CCCs’Yields on junk bonds rated CCC have risen steadily since March, when the US and Israel were launching their first strikes on Iran.

But they’ve spiked aggressively since September as a selloff in Treasuries boosted benchmark borrowing costs, and investors started to become more nervous about risks associated with the mountain of AI-related financing to be sold, including by companies already groaning under heavy debtloads. In lockstep with rising stress in junk bonds, the deeply distressed tail of the leveraged loan universe has grown to levels not seen since the beginning of the pandemic. The volume of loans trading below 60 cents on the dollar, signaling deep distress in September was at its highest since March 2020, according to a research note from JPMorgan Chase & Co. The amount of loans trading at or below 80 cents on the dollar surged almost 90% in the past 12 months, the strategists wrote.

A significant cohort of CCC-ranked borrowers already carry heavy leverage and are more susceptible to rate increases as the cost to service their debt swells. For some of these companies, restructuring is a likely outcome, according to Robert Cohen, director of corporate credit at DoubleLine Capital, which oversees more than $93 billion in assets.

There are “hopeless CCCs, regardless of the macro, that are going to get restructured,” Cohen said in an interview. The possibility of a liability management exercise, a process that can often leave creditors and borrowers at loggerheads, are among the difficulties with those investments, he said.

But he sees those as credit-specific issues. “I do not believe the stress in CCCs is indicative of a credit cycle,” Cohen said.

It is unusual for CCC spreads to blow out so much while the rest of the credit market remains generally stable. The differential between CCC and the higher-rated tier of BB spreads is the widest its been since the pandemic.

Distressed companies including Quest Software or CDK Global are staring at technological obsolescence for example, as AI advancements could threaten their business models. Cornerstone Building Brands Inc., whose bond due in August 2029 was quoted at about 37 cents on the dollar on Friday, is grappling with a debt restructuring and depressed earnings.

Other companies with bonds or loans trading at less than 60 cents on the dollar include Altice International and broadband provider Brightspeed. Liberty Communications of Puerto Rico LLC was also slashed to CCC by S&P Global Ratings as it faces a restructuring or default on about $1.2 billion in bonds due next October, the credit grader wrote in a note Wednesday.

Like software, cable and telecom companies face pressure from new technology. Elon Musk’s Starlink Inc., for example, is competing for broadband customers, while cable-television providers are bleeding viewers to streaming services.

“We’re seeing pockets of stress across industries,” said Jared Parker, co-head of global opportunities at Oaktree, which built its business around distressed investing. “The sea change in rates that started in 2022 has hit the housing sector very hard, and weakness there has broader knock-on effects across the economy,” he said.

Oaktree, which manages more than $160 billion in credit assets, is being selective in how it is taking advantage of beaten down credits, he said.

More broadly, investors, including those who typically invest in high-grade borrowers, have fled to higher-rated portions of the junk-debt market.

But others are starting to look for opportunities within the most beaten-down pockets of the market, even in software. Businesses with short-dated debt, high customer retention and revenue growing at 5% or 6% are among those worth looking at, Steven Tananbaum, chief investment officer at GoldenTree Asset Management said at the Morgan Stanley Credit Symposium.

He noted that some of these “you can buy at 70% discounts to what these companies were sold at a few years ago. A few of them strike me as very reasonable.”

Credit Edge: Retail Scoops Up Battered AI Long Bonds (Podcast) Week In Review Credit pressures ramped up during the week, with concerns around AI borrowing, unrest in France, persistent Mideast tensions and resurgent energy prices all conspiring to dent the appeal of corporate debt. On Friday, the cost of protecting a basket of blue-chip US company debt against default rose to the highest level since March, mirroring a jump in corporate bond yield premiums globally, which on Thursday surged to their widest since May 2025.

“I see this as the beginning of a more sustained repricing of credit risk,” said Lakshmanan R, head of South and Southeast Asia corporates at CreditSights in Singapore. “It is the culmination of multiple global risks hitting markets one after another.”SpaceX’s efforts to finalize a $40 billion off-balance-sheet debt structure for its artificial intelligence buildout have been roiled by recent market turmoil that’s driven up sector-wide borrowing costs and complicated price talks. While pricing discussions are ongoing, finding levels that both sides can agree on has become complicated by anxiety that has rippled through credit markets in recent days. The company’s bonds weakened this week after it posted results and indicated it was investing aggressively.

Meta Platforms Inc. saw its bonds pressured as well after it posted results and said it was looking at raising “hundreds of billions of dollars” over several years beginning this fall.

Companies have postponed more than $5 billion in US and European debt sales this month amid elevated interest rates, rising credit risks, resurgent inflation, and potential cracks in the AI boom. The bond and loan sale delays have come from at least seven companies and mark the biggest spate of postponements this year. Among the delays is AVI-SPL Inc., a seller of audio-visual equipment, abandoning its plan to raise $690 million in the US leveraged-loan market. Mesirow Financial postponed the sale of $175 million of bonds backed by the mortgage on a midtown Manhattan office tower.

Despite the rising credit concerns, companies continued to tap the market, with Walmart Inc. and Kimberly-Clark Corp. among borrowers Among financial firms, Citigroup and Wells Fargo & Co. each sold euro-denominated debt In the high-yield market, the calendar was light although Grant Thornton Advisors LLC junk bonds for the first time Two of Europe’s fastest-growing hedge funds are being pummeled by a collapse in the debt of the market’s riskiest borrowers. Arini Capital Management, the London fund manager founded by ex-Credit Suisse trader Hamza Lemssouguer, lost 6.9% in the first half of October, following a 15.7% drop through September. Sona Asset Management’s main hedge fund, meanwhile lost about 3.1% during the same two-week span, erasing its gains for the year.

Funds are being stung by a string of wrong-way bets, including those on the debt of European telecom company Altice International, luxury car-maker Aston Martin and British telecom Virgin Media O2. Tradeweb Markets Inc. struck a deal to buy Trumid Holdings, an electronic credit-trading platform, for just under $2 billion.

Tradeweb has been building out its electronic marketplaces for assets such as credit and equities in recent years. A purchase of Trumid, which focuses on US dollar-denominated investment grade, high yield, distressed and emerging market bonds, will help the companies cover the whole life cycle of debt, from trade inception to the secondary market. In what would be among the biggest out-of-court restructurings ever, French billionaire Patrick Drahi is closing in on a deal with creditors that would hand them control of his US telecom company Optimum Communications.

A deal over the company’s more than $26 billion of debt would end a long-running dispute between the two sides. Optimum last year filed an antitrust lawsuit against creditors that had banded together in a cooperation agreement, while creditors last month accused the company of siphoning value out of their reach and into the pockets of insiders. Public sentiment about private credit has become“divorced from the market-wide reality,” according to a report from the Alternative Credit Council, which represents fund managers in the industry.

Any healthy market is expected to go through tests, wrote authors Jiří Król and Cindy Ma, pointing instead to the 17% year-on-year increase in assets under management to $4.1 trillion as a sign of growth. Some credit metrics are continuing to improve, they added. Citadel Securities is considering expanding in fixed income over the next couple of years, according to President Jim Esposito.

“We are not in a hurry, but we do have some gaps there in our offering,” he said in a Bloomberg Television interview Tuesday. Citadel Securities has long had a major foothold in the equity market, but Esposito said the firm still sees room to grow in fixed income, where it currently trades global interest rates and US investment-grade credit. The company has been hiring for that business, adding Nikhil Choraria and Nirubhan Pathmanabhan from Goldman. America’s Car-Mart and its lenders are working toward a sale that will allow the business to continue operating, people familiar with the matter told Bloomberg, as the used-car dealer and subprime lender navigates tight liquidity and mounting debt pressures.

Discussions center around a deal that would be executed through a court-supervised Chapter 11 sale process or via a shareholder vote. Some investors in a Crescent Capital Group investment vehicle are seeing their capital wiped out after the manager took the controversial step of deeming the vast majority of the deal’s underlying loans as credit risks.

Crescent unwound Atlas Senior Loan Fund X Ltd. — a collateralized loan obligation which pools riskier corporate loans into bonds of varying risk and return — by applying this designation across most of its portfolio in June, according to deal documents seen by Bloomberg News. While unusual, the transaction’s governing documents grant the manager leeway for such a maneuver. Moody’s Ratings introduced a new methodology rating digital infrastructure companies, examining quantitative and qualitative factors alongside financing structures, construction risks, and asset ramp-up timelines.

The framework also considers customer concentration and credit quality of major clients, with no expected impact on existing or future ratings. On the Move Royal Bank of Canada hired Derek Hafer from Bank of America Corp.

to lead its credit and municipal trading business globally, as Canada’s largest bank continues to expand in US financial markets.