The U.S. private credit market saw a slight improvement in credit performance over the past year, though defaults remain elevated compared with late 2024, according to Fitch Ratings. The private credit default rate declined to 5.2% in the 12 months through July 2025, down from 5.5% in June, but still above the 4.6% level recorded in December 2024. 

Fitch’s measure combines the privately monitored rating default rate and its new model-based credit opinion default rate. Both trended lower in July: the monitored rate slipped to 9.2% from 9.5%, while the model-based rate eased to 4.2% from 4.5%. 

The composition of defaults highlights the ongoing strain in corporate balance sheets. Of the 63 unique defaults captured over the period, nearly 70% stemmed from issuers deferring interest payments or shifting to payment-in-kind (PIK) structures—a signal that companies are struggling to generate sufficient cash flow. Roughly 14% were tied to stressed maturity extensions, reflecting continued refinancing challenges, while bankruptcies and liquidations accounted for only about 5%, underscoring lenders’ preference for amend-and-extend solutions over outright restructuring. 

While the July decline points to some stabilization, Fitch noted that default rates remain historically high as elevated borrowing costs and slowing earnings growth continue to pressure leveraged borrowers. The persistence of PIK-driven restructurings suggests that while outright defaults may be contained, credit quality erosion remains a concern for private lenders and institutional investors alike. 

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