The default rate for US private credit borrowers has surged to an all-time high in the second quarter, according to a new report from Fitch Ratings.
The rating agency’s data, which tracks approximately 1,300 borrowers, indicates that the deterioration in credit quality is no longer a peripheral risk but a central feature of the current market environment.
This marks a significant escalation in the stress levels within the private debt market, which has grown rapidly in recent years as an alternative to traditional bank lending.
The record default rate underscores the fragility of the asset class, which has long been marketed on the premise of steady, illiquid returns with lower volatility than public markets.
As borrower strain intensifies, the gap between the perceived safety of private credit and its underlying risk profile is widening.
This development is likely to pressure secondary market valuations and increase the cost of capital for leveraged borrowers who rely on these funds for financing.