Fitch reports record defaults of 6.3%, while loan-weighted data shows less than 1%; Pimco’s shadow gauge reaches 19% for a narrower BDC market.
Private credit default rates vary sharply depending on how defaults are defined and which borrowers are counted, leaving investors without a single reliable measure of stress in the $1.8 trillion market.
Fitch Ratings put the rate at a record 6.3% this week, while Houlihan Lokey found defaults below 1% when the market is weighted by loan size because the largest borrowers continue to perform. Pimco’s narrower gauge for US business development companies puts “shadow” defaults at 19%, up from about 14% in 2022.
The data gap reflects limited borrower and lender disclosure and differing definitions of distress. Some measures exclude restructurings or “bad PIK,” in which interest is added to a loan’s balance rather than paid in cash.
Investors are watching when rising distress could threaten returns or broader stability. Managers may absorb default rates of 8% to 9%, according to an ING strategist, but rates of 12% to 15% after a major economic shock could raise systemic concerns.
