Bloomberg Talks – Marathon Asset Management CEO Bruce Richards Talks Software

Date: March 4, 2026
Guest: Bruce Richards, Chairman and CEO, Marathon Asset Management
Host(s): Bloomberg team

Episode Overview

This episode explores the growing risks in highly leveraged software lending, as Bruce Richards, CEO of Marathon Asset Management, predicts software default rates in private credit could climb to 15%—mirroring oil & gas’s crisis a decade prior. The conversation dives into why software lending became so dominant, the implications for both direct and syndicated loan markets, risks for private equity and credit investors, and Richard’s outlook on where opportunity and risk are headed.

Key Discussion Points & Insights

Comparing the Software Sector to Oil & Gas in 2016–2018

• Richards draws a parallel between tech-driven disruption in oil & gas (horizontal drilling/fracking) and what's now happening in software through rapid technological change—mainly AI and cloud.
• "Back in 2014, a new technological change happened for oil and gas; it's called horizontal drilling or fracking. ... What we have in software is very similar. We have a technological change which is forever going to change how software is going to be priced." (Bruce Richards, [01:14])
• Result: In oil & gas, this led to a collapse in capital raising and ultimately a 15% default rate in 2016–2017. Richards warns software could be next.

Scale of Leverage & Exposure in Software

• Disproportionate Exposure: While software represents only about 1% of US companies and 7% of publicly listed firms, 23% of the direct lending business targets software deals ([02:31]).
• Leverage Details:
  • Public software companies: less than 1 turn of leverage
  • Syndicated loan market: 5 turns of leverage
  • Direct lending: up to 20 times leverage ([02:57])
• "You don't have the companies that can generate the free cash flow to reposition ... They're in a very tough position." ([03:23])

Liquidity Pressures & Investor Behavior

• Investors are getting spooked: Redemptions from illiquid private credit funds are rising as investors try to exit before trouble hits ([03:45]).
• Fund managers are selling their best assets: "They can't be selling those 20 times even software loans. Right. They must be selling their best assets." (Host, [04:19])

"Extend and Pretend" Looms for Direct Lending

• Richards forecasts a crunch: As capital dries up, it will be harder to roll over (extend/amend) loans coming due in 2027–2028.
• "There won't be availability of capital. So I think the next round in the years 27–28 ... is in the direct lending business to amend or extend and pretend ... because they won't have the cash flow." (Bruce Richards, [04:36])
• PIK (‘Payment In Kind’) financing will likely rise, with lenders not getting paid in interest or principal ([05:01]).

Broader Market Impact—Or Lack Thereof

• Minimal systemic risk:
  • "The industry is fine because ... software is only a few percent of the overall economy." (Bruce Richards, [05:28])
  • "I think the economy will just be fine without having to deal with the default rates that are coming." ([06:26])
• ‘Religion and discipline’ will return to underwriting:
  • The cycle will "cause religion to come back in and discipline to come back in because quite simply, ... 23% in software is just too much exposure." ([06:55])

Future Lending—Conservative, Selective, and Real Asset-Oriented

• Lower leverage moving forward:
  • "When you lend in software, you have to lend at a very conservative multiple... four times EBITDA, not ten times, is probably the right number… with tighter covenants." ([05:42])
• Opportunities for lenders with dry powder:
  • "We can get paid more for loans that we're making in the marketplace with tighter covenants." ([06:09])
• Avoiding new software lending:
  • "Not right now. In software, what we're focused on are businesses where halo is the effect. Hard assets, low obsolescence." ([09:09])
  • Current focus: concrete, commercial/residential real assets, aircraft, maritime assets, turbines, cranes, engines ([09:12]).

Risk/Reward for Private Credit vs Private Equity

• Private equity can take risks—credit cannot:
  • "Private equity has all the upside. ... They can afford a few zeros, right? And still come out okay. Private credit can't afford the zeros. They only get paid that far. They don't have the upside. So what you need ... is certainty." ([08:18])

Notable Quotes & Memorable Moments

• On leverage gone wild:
  • "In the direct lending business, you can have 20 times leverage. ... You don't have the companies that can generate the free cash flow to reposition ... They're in a very tough position." (Bruce Richards, [02:53])
• On capital drying up & the looming crunch:
  • "There won't be availability of capital. So I think the next round in ... 27 and 28 ... is in direct lending ... to amend or extend and pretend ... because they won't have the cash flow." ([04:36])
• On avoiding a systemic meltdown:
  • "I wouldn't let software ... tank the economy. ... The economy is so much bigger and diverse than this." ([06:27])
• On learning from this cycle:
  • "It will cause religion to come back in and discipline to come back in because ... 23% in software is just too much exposure." ([06:55])
• On new lending focus:
  • "Our last private credit lending deal ... was a concrete deal with rebar. ... These are real asset lending opportunities. ... Asset deals ... hard assets, low obsolescence: aircraft, maritime assets, turbines, cranes and engines." ([09:09])

Timestamps of Critical Sections

• [01:12] – Analogy between energy sector collapse and software sector risks
• [02:31] – Disproportionate software exposure in direct lending markets
• [04:36] – Forecast of capital crunch and "extend and pretend"
• [05:42] – Lending standards tightening; conservative approaches
• [06:55] – Overexposure and return of lending discipline
• [07:53] – Opportunities in distressed software assets
• [08:18] – Differences in risk between private equity and private credit
• [09:09] – Pivot away from software to hard assets in lending focus

Overall Tone & Language

• Richards is pragmatic, frank, and analytical—emphasizes the data and experience over hyperbole.
• A sense of seasoned caution: recognizing new opportunities will emerge, but only for those who maintained discipline.
• The host team asks pointed, informed questions that keep the conversation focused on concrete implications for listeners and the market.

Summary Takeaways

• Highly leveraged software loans are likely heading for significant default rates—potentially 15% or more—as capital dries up.
• Software’s outsized share of direct lending is the result of a ‘gold rush’ that now appears unsustainable.
• Private equity may thrive on the wreckage, able to scoop up cheap assets, but private credit lenders are at serious risk if improperly exposed.
• Marathon and similar disciplined firms are pivoting sharply away from software, focusing on real asset-backed lending with low obsolescence and strong recovery value.
• The result may be painful, but Richards sees minimal systemic threat—just a hard but necessary lesson in sector discipline and risk management.