A number of companies that relied on private credit will need to overhaul their balance sheets, Jon Winkelried, the CEO of TPG, said Monday.

Those most likely to do so include borrowers that are currently paying interest in kind — rather than cash — and those that have previously gone through pre-bankruptcy restructurings, Winkelried said at Semafor World Economy in Washington, DC.

While he said that overall, the sector is performing as expected — with winners and losers at every level— among the hardest hit will be investments made in software companies in the pre-ChatGPT era in 2020 and 2021 when they were trading at higher multiples.

“There is a certain part of the market where there is repricing going on, ” Winkelried said. “There are going to be a number of capital structures that are going to have to be addressed and reworked.”

With so much capital flowing into private credit funds in prior years, lenders lowered their standards, allowing software companies to borrow at large multiples to metrics such as cash flow. Now some are overleveraged.

Overall, though, the credit markets are in reasonable shape, he said.

“It’s not surprising that we would be going through some adjustment period here,” Winkelried said. “By and large, he added, “the credit markets are actually in pretty good shape.”