BLOG — Apr 10, 2025

Industries Biggest Negative Movers: Risks and Opportunities for Private Credit

This article is written and published by S&P Global Market Intelligence, a division independent from S&P Global Ratings. Lowercase nomenclature is used to differentiate S&P Global Market Intelligence credit scores from the credit ratings issued by S&P Global Ratings.

The private credit market has grown enormously over the past five years with Assets Under Management (AUM) estimated to grow to $2.8tn by 2028, which is close to double the 2022 AUM of $1.5tn1. The largest category within private credit has been direct lending, accounting for approximately 44% of the overall AUM. The dominance of this asset class has been spurred by the continued need from Small & Medium Sized Enterprise’s (SMEs) and large corporations to access financing outside of the traditional banking sector ,sometimes as a last resort of financing, but often due to the closer interaction with their lenders and quicker execution speeds. However, rising competition in the market and increased scrutiny from investors on risk assessment methodologies, while maintaining comprehensive risk management processes, have led to the need for quicker turnarounds.  This is made more difficult given the lack of transparency on private credit transactions or availability of relevant benchmarks.

One approach could be to look at industries that are exhibiting the biggest increases in credit risk and could therefore represent companies that are most in need of defensive capital.

This brief analysis uses the RiskGauge(RG) Industry and Country Benchmarks . The RiskGauge score is a blended credit risk score that combines financial, business and market risk to provide a holistic view of risk for millions of public and private companies globally across most industries. We have taken the median score for these industries denoted by a 1 to 100 metric (the higher the number, the better the score). Within our result sets we have identified the top five riskiest non-financial corporate industries from a credit risk perspective within Germany, the United Kingdom and the United States of America.

Industries Most Increased in Risk - Germany

The five industries in Germany showing the biggest deterioration in RiskGauge Median Credit Score between December 2022 and December 2024 include: diversified real estate activities, multi-utilities, automobile manufacturers, copper and homebuilding. As shown in Figure 1,  copper and diversified real estate activities showed the most volatility ranging from the highest (and best) median score of 51 in February 2024 down to a low median score of 23 in October 2024. Automobile manufacturers had the most consistent scores over the period starting in December 2022 with a median score of 30 and ending December 2024 with a median score of  27 – a change of 11%.

Figure 1: Most Increased Risk - German Industries  

Source: S&P Global Market Intelligence. As of March 7, 2025.

Snapshot Industry Analysis - Germany

Diversified real estate activities, an industry with activities spread across many areas of real estate including management, development and sales, showed the biggest increase in risk.  Out of the five industries, this one had the worst score in 2024, falling from a median score of 36 to 26 between December 2022 and December 2024.  It reached its lowest point between May 2024 and October 2024 with a median score of 23 – a score level classified as very high risk, with a credit risk increase of 39%. This coincided with German commercial property prices falling by more than 5% in 20242, indicating that activity and demand had still not returned to pre-pandemic levels despite a strong residential rental market. Automobile manufacturers were also showing similarly elevated risk levels, due in part to the fall in export demand from several countries, most notably China, with increased competition from Chinese manufacturers. The multi-utilities industry had the best scores out of these industries, partially due to state support protecting their credit quality.

Industries Most Increased in Risk – U.K.

During December 2022 through December 2024, industrial REITs, office REITs, healthcare REITs, multi-utilities and cable & satellite were U.K.’s top 5 industries with the biggest increase in risk.  As seen in Figure 2, industrial REITs and office REITs showed the largest deterioration in median score with the median scores falling from 52 to 37 and 51 to 40, respectively -  an increase of 40% and 27%, respectively. Multi-utilities displayed the most volatility over the period with median scores ranging from 40 in January 2023 to 53 in April 2024 and back down to 41 in December 2024. Cable & satellite represented the most stable median scores out of the 5 industries but also had the lowest/worst scores overall ending December 2024 at 24, a score classified as Very High Risk. 

Figure 2: Most Increased Risk – United Kingdom Industries

Source: S&P Global Market Intelligence. As of March 7, 2025.

Snapshot Industry Analysis – U.K.

The real estate industry had the most prevalent issues amongst all the industries biggest negative movers as can be seen with the performance of U.K .REITs. The elevated interest rates in 2024 contributed to a fall in property valuations, with office REITs being particularly susceptible to a longer drop in valuations due to low occupancy rates3 and refinancing challenges. Multi-utilities displayed the 4th worst performance ending December 2024 at 41, which is a 12% increase from December 2022.  This industry experienced several challenges, with the water utilities sector being particularly under pressure4 and needing significant investment while struggling with mounting debt.  This was most notably exemplified in the recent travails of Thames Water. Cable & satellite’s performance can be partly explained by the traditional media’s decreased advertising revenue, lowered viewing figures, and competitive provision of streaming services. 

Industries Most Increased in Risk – U.S.

The 5 industries with the biggest reduction in RiskGauge Scores in the U.S are diversified chemicals, industrial conglomerates, rail transportation, brewers and diversified real estate activities. As shown in Figure 3, diversified chemicals experienced the biggest drop in median score between December 2022 and December 2024 from 53 to 40 -  adding 33% increase in credit risk. industrial conglomerates, which include a wide array of business types with activities spread across diverse areas such as automotive, aerospace, technology and real estate, had the second largest increase in risk over the same period falling from 45 to 33. Amongst the 5 industries diversified real estate activities had the worst scores from December 2022 to April 2024 dropping from 43 to 32, respectively – moving from Moderate to High Risk. However, brewers took the mantle of lowest score on May 13, 2024 with a score of 31 and closed December 2024 at that same High Risk level.       

Figure 3: Most Increased Risk – United States Industries 

Source: S&P Global Market Intelligence. As of March 7, 2025.

Snapshot Industry Analysis – U.S.

The drop in diversified chemicals performance could possibly be attributed to a decline in demand post-pandemic, as supply chains returned to normality in late 2022. This impacted competition, resulting in lower margins and returns on capital. The heightened risk in diversified real estate activities was symptomatic of the well-documented pressures on commercial real estate and uncertainty regarding Fed rate cuts, as inflation remained high in 2024. Due to the diverse nature of their business activities, international conglomerates often experience operational inefficiencies, resulting in many splitting into separate businesses in the U.S. This, coupled with macroeconomic and supply chain issues, negatively impacted sales growth. As mentioned above, brewers ended 2024 with the lowest scores, as more craft breweries closed than opened5 over the course of the year. Additionally, the industry experienced an exponential increase in the cost of ingredients and changing consumer preferences.

For more information about Credit Analytics models and the Industry Benchmarks used in this analysis, please reach out to us here.

 

[1] https://www.preqin.com/news/private-debts-rapid-growth-merits-closer-scrutiny-imf-says

[2] Statista:https://www.statista.com/statistics/1189635/commercial-real-estate-market-size-europe/

[3] S&P Global Ratings Commentaries: Most European REITs’ Valuations Should Bottom Out in 2024

[4] S&P Global Ratings, Industry Credit Outlook 2025: EMEA Utilities

[5] Source: https://www.nytimes.com/2024/12/27/dining/drinks/craft-beer.html