Rating Agencies: What AI Disruption?

Citi reports that the speculative-grade downgrade/upgrade ratio has hit a four-year low, while identifying AI Risk Scores as a critical performance differentiator for B1 and B2 software loans.

Key Takeaways

• 1.The downgrade/upgrade ratio for speculative-grade loans hit a four-year low of 0.69 at the end of April 2026.
• 2.Citi's proprietary AI Risk Score has become the most significant differentiator for performance in B1 and B2 software loans.
• 3.Credit improvement is broad-based across major sectors including technology, services, finance, and healthcare.

Table of Contents

• Rating Agencies: What AI Disruption?
• Best Downgrade/Upgrade Ratio in Years
• Quality Lens
• Sectoral Lens
• Market Valuation: AI Risk Emerges as a Return Differentiator in B1 and B2 Software Loans
• AI Risk Score Serves as Clear Differentiator
• Reasons for Importance for B1/B2
• Beyond Valuation: Active Risk Management
• Q & A
• Appendix A-1

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