US private credit default rate reaches record high

The US private credit market reached a record high default rate in August, according to data from Fitch Ratings. The trailing 12-month default rate for private debt borrowers rose to 6.3%, up from 6.1% in July.

Fitch recorded 14 default events in August, the highest monthly total since the agency began tracking this specific data in 2024. Of these, 11 involved unique borrowers and three involved repeat defaulters. A significant portion of these defaults—approximately 45% in August—were attributed to loan maturity extensions driven by economic pressure.

Sector performance varied significantly. Healthcare, industrial, and manufacturing sectors experienced the highest distress, each posting a 12-month default rate of 9.9%. In contrast, the software sector remained resilient with a default rate of only 0.6%. Companies with an EBITDA of $25 million or less have consistently shown higher vulnerability to these defaults.

Analysts suggest that floating interest rates and limited hedging capabilities among smaller borrowers have exacerbated the pressure. Additionally, uncertainty regarding inflation and interest rates has hindered investment groups from offloading distressed assets before loan maturities occur.