The Credit Edge by Bloomberg Intelligence Seix Fears More Zombie Borrower Distress as Interest Rates Stay High
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Jan 22, 2026 George Goudelias, Chief Investment Officer at Seix Investment Advisors, delves into the rising crisis of 'zombie borrowers' as interest rates soar. He warns these highly-indebted companies, with weak cash flow, face growing pressure in the current market. They also explore the impact of private credit on traditional leveraged finance and identify risky sectors like tech and healthcare amidst poor covenants. Goudelias shares insights on attractive investment buckets and cautions about the consequences of loose underwriting in the private credit space.
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Tilt Towards Higher-Quality Single-Bs
- Favor higher-quality single-B and BB credits where interest coverage is stronger.
- George Goudelias recommends focusing on B1/B2 names and double-Bs for better risk-reward.
Three LBO-Heavy Sectors In Trouble
- Tech, healthcare, and services (LBO-heavy) are the three big trouble sectors.
- Many LBOs priced for synergies now face higher leverage and downgrades when those gains fall short.
Public Tech vs Sponsor-Backed Tech Diverge
- Public hardware and high-quality software names perform, but sponsor-backed tech LBOs struggle.
- Goudelias notes competition from big software firms can quickly make middle-market tech obsolete.