US Private Credit Defaults Reach Record 9.2% in 2025, Fitch Reports
In 2025, the default rate among U.S. corporate borrowers of private credit reached an alarming 9.2%, according to Fitch Ratings. This figure represents the highest default rate recorded to date, surpassing the previous year’s rate of 8.1%. The report highlighted 38 defaults spread across 28 distinct borrowers among a total of 302 companies monitored.
Key Statistics from 2025 Defaults
- Default Rate: 9.2%
- Previous Year Default Rate: 8.1% in 2024
- Number of Defaults: 38
- Number of Borrowers: 28
- Companies Monitored: 302
Impact of Company Size
Smaller issuers, specifically those earning $25 million or less, accounted for a large portion of the defaults. Most of the companies analyzed by Fitch were middle-market firms, typically generating $100 million or less in earnings and maintaining approximately $500 million or less in outstanding debt.
Types of Defaults Recorded
The report includes various forms of defaults, such as bankruptcy filings and distressed debt exchanges. In the latter, borrowers negotiate with lenders to restructure their debt obligations.
Sector Insights
Interestingly, despite a significant market-wide downturn in the software sector—a key borrower group for private credit—no defaults were reported in that segment for the previous year. Fitch categorizes software companies according to their primary market sectors, affecting the analysis of defaults.
Interest Rates and Default Trends
Fitch noted that most private credit loans are tied to floating rates linked to the federal funds rate, which has remained elevated for three consecutive years. This situation has made companies’ cash flows particularly susceptible to increasing interest rates. The report indicated that the capital structures of monitored portfolios largely consist of floating rates with minimal hedging against rate increases.
The rise in the default rate underscores growing financial pressures on U.S. corporate borrowers within private credit markets. As conditions evolve, stakeholders will closely monitor these trends to gauge future implications for the broader financial landscape.
