The default rate for US private credit borrowers reached a record high of 6.3% in August, according to Fitch Ratings, exceeding the previous month's 6.1%. This figure tracks a trailing 12-month period across 1,300 borrowers and includes distressed exchanges and duress-driven maturity extensions.
However, other reports present vastly different default rates, highlighting a measurement gap in the estimated $1.5-$2.0 trillion global private credit market. For instance, Proskauer's Private Credit Default Index reported a rate of 2.51% for Q2 2026, tracking US senior-secured and unitranche loans. This contrasts with Fitch's broader definition, which includes items Proskauer might classify as successful amendments. The Financial Stability Board (FSB) attempts to reconcile these differences by stating that outright loan defaults are around 1%, but rise to approximately 5% when selective defaults, such as non-arm’s-length restructurings, are included.
The discrepancy in reported default rates stems from varying definitions. Proskauer's index counts missed payments, distressed restructurings, breached financial covenants, or loan modifications made in anticipation of default. Fitch, conversely, includes distressed exchanges and duress-driven maturity extensions, which can lead to a loan being recorded as a default by Fitch while Proskauer might view it as an amendment. KBRA, a third major tracker, reported 3.1% in its most recent monitor, with its methodology weighing more heavily toward larger sponsor-backed borrowers and treating amend-and-extend transactions more conservatively. These definitional differences, rather than data discrepancies, are the primary reason for the wide spread in reported default rates.
Rising defaults are particularly evident among smaller borrowers and in the healthcare sector. Houlihan Lokey's analysis showed that approximately 12% of borrowers with less than $20 million in EBITDA had loans marked below 90 cents on the dollar in Q2, a significant increase from 1% in 2023. Defaults, encompassing both technical and payment defaults, affected 2.5% of borrowers by count, though only 0.8% by loan principal. The healthcare sector experienced elevated defaults at 4.2% by count and 2.7% on a size-weighted basis, while software borrowers showed some of the lowest default rates. These differing metrics indicate that the perceived health of the private credit market largely depends on the specific definitions and methodologies employed by various reporting agencies.
