THINK TWICE BEFORE LENDING MONEY TO AMERICAN COMPANIES RIGHT NOW.
Trouble is growing inside the US private credit market.
According to Fitch, the default rate across 1,300 private credit borrowers reached a record 6% in the second quarter, up from 5.7% in the previous quarter.
There were 32 default events involving 20 new defaulters. Over the past 12 months, the total has reached 84.
Industrials and manufacturing were hit the hardest. Their default rate jumped from 5.9% to 10.4% in just one quarter.
Healthcare also moved deeper into trouble, rising from 6.9% to 9.4%.
But “default” does not always mean bankruptcy.
More than half of these cases involved companies extending their loan deadlines because they could not repay the money on time.
The real problem is how these loans are structured.
Almost all private credit loans have floating interest rates. SOFR has fallen by only 0.10 percentage points in 2026, while lenders have added another 0.50 to 1 percentage point in risk premiums since late 2025.
That has pushed borrowing costs to roughly 9.15%–9.65%.
Many of these companies already carry debt worth several times their annual earnings. When profits fall but interest costs remain high, manageable debt can quickly become impossible to repay.
Fitch entered the year expecting defaults to slow as rates came down and business deals recovered.
The opposite happened.
Markets are now pricing in possible rate hikes, dealmaking remains weak, and Fitch expects defaults to stay high for the rest of the year.
Software is the surprising exception. Its default rate dropped from 2.3% to just 1.2%, despite growing fears about AI disrupting the industry.
The message is clear: weaker companies are paying more to carry the same debt, and the rate relief they were waiting for may not arrive.
This is not a bankruptcy wave yet—but the warning lights are getting brighter.
Trouble is growing inside the US private credit market.
According to Fitch, the default rate across 1,300 private credit borrowers reached a record 6% in the second quarter, up from 5.7% in the previous quarter.
There were 32 default events involving 20 new defaulters. Over the past 12 months, the total has reached 84.
Industrials and manufacturing were hit the hardest. Their default rate jumped from 5.9% to 10.4% in just one quarter.
Healthcare also moved deeper into trouble, rising from 6.9% to 9.4%.
But “default” does not always mean bankruptcy.
More than half of these cases involved companies extending their loan deadlines because they could not repay the money on time.
The real problem is how these loans are structured.
Almost all private credit loans have floating interest rates. SOFR has fallen by only 0.10 percentage points in 2026, while lenders have added another 0.50 to 1 percentage point in risk premiums since late 2025.
That has pushed borrowing costs to roughly 9.15%–9.65%.
Many of these companies already carry debt worth several times their annual earnings. When profits fall but interest costs remain high, manageable debt can quickly become impossible to repay.
Fitch entered the year expecting defaults to slow as rates came down and business deals recovered.
The opposite happened.
Markets are now pricing in possible rate hikes, dealmaking remains weak, and Fitch expects defaults to stay high for the rest of the year.
Software is the surprising exception. Its default rate dropped from 2.3% to just 1.2%, despite growing fears about AI disrupting the industry.
The message is clear: weaker companies are paying more to carry the same debt, and the rate relief they were waiting for may not arrive.
This is not a bankruptcy wave yet—but the warning lights are getting brighter.