Private Credit Defaults Hold at Record High — Evening Brief – 06.22.26
Private credit defaults remained elevated in May, highlighting growing stress among smaller borrowers even as lenders continue to rely on maturity extensions and payment flexibility to avoid outright failures.
Fitch Ratings reported that its U.S. Private Credit Default Rate (PCDR) held steady at 6.0% for the 12 months ended May, matching April’s level and remaining the highest reading since the ratings agency launched the index in August 2024.
Beneath the headline figure, however, conditions continued to evolve. Fitch’s model-based credit opinion (MCO) default rate rose to a record 4.9% from 4.8% in April, while its privately monitored rating (PMR) default rate edged lower to 9.5% from 9.7%, suggesting distress remains widespread but is not accelerating.
Fitch recorded 14 private credit default events in May, with healthcare providers, industrial and manufacturing companies, and business services firms accounting for three events each. Of the 14 defaults, eight involved new issuers while six were repeat defaulters.
The data underscore how defaults in private credit differ from those in public markets. Seven of May’s default events involved maturity extensions negotiated under distressed conditions, while five borrowers switched to payment-in-kind (PIK) interest instead of cash payments. Only two issuers experienced uncured payment defaults.
Over the trailing 12-month period, Fitch recorded 83 unique defaulters and 105 total default events. Payment deferrals and PIK arrangements accounted for more than half of all events, while maturity extensions represented roughly one-third.
Smaller companies remain the most vulnerable. Borrowers generating $25 million or less in EBITDA represented 55% of unique defaulters and posted an 11.5% default rate. By contrast, issuers with EBITDA between $26 million and $50 million saw defaults decline to 3.9%.
Healthcare providers remained the sector with the most unique defaulters, posting a 7.6% default rate. Industrial and manufacturing companies now carry the highest default rate among major sectors at 10.3%, while technology software remains comparatively resilient with a default rate of just 2.2%.