Fitch RatingsPrivate± Mixed
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Fitch Reports U.S. Private Credit Default Rate Surges to Record 6.3%
Macro
The default rate in the U.S. private credit market climbed to a record high of 6.3% at the end of August, up from 6.1% in July, according to a report by Fitch Ratings, based on roughly 1,300 borrowers over the trailing 12 months. The rise comes amid pressure from interest rate and inflation uncertainty that has slowed deal activity in the market and made it harder to sell troubled companies before their debt comes due. Lyle Margolis, head of North American private credit at Fitch, said a key driver was the extension of debt maturities, which Fitch classifies as a default. In August, Fitch recorded 14 default events in total, involving 11 borrowers in default, with the remaining three stemming from borrowers that had already defaulted multiple times. Maturity extensions accounted for 45% of default events in August, the highest share for a third consecutive month. Over the past 12 months there were 89 defaults in total, with payment deferrals and switches to payment-in-kind arrangements together accounting for 47% of all defaults. Broken down by industry, healthcare, industrial and manufacturing posted the highest default rates, each at 9.9%, up from 9.5% in July. By contrast, technology software had the lowest default rate among the industries rated by Fitch, falling to 0.6% from 1.2% the previous month.