Fitch Ratings said the default rate for U.S. corporate borrowers of private credit climbed to 9.2% in 2025, a new high that surpasses the prior record of 8.1% recorded in 2024. The rating agency's private credit monitor covered 302 companies with outstanding private credit debt and identified 38 defaults across 28 separate borrowers during the year.
The cohort of businesses tracked by Fitch is primarily made up of middle-market firms, typically those with $100 million or less in earnings and roughly $500 million or less in outstanding debt. Within the defaults Fitch observed, a majority involved smaller issuers with $25 million or less in earnings. The agency noted that the defaults were dispersed across sectors rather than concentrated in a single industry.
Fitch's tally of defaults included both formal bankruptcy filings and distressed debt exchanges, the latter describing situations in which borrowers negotiated restructurings with their lending groups. The report emphasized that many of the private credit facilities in the monitored portfolio carried floating interest rates linked to the federal funds rate.
Fitch pointed to the persistence of elevated policy rates over the past three years as a material factor in the increase in defaults. "Capital structures in the PMR portfolio tend to be predominantly floating rate with minimal interest rate hedges in place," the report's authors wrote, referring to privately monitored ratings. "This leaves companies' cash flow highly vulnerable to elevated rates."
The agency also observed that its findings emerged against a backdrop of a broad sell-off in software sector equities - a group that represents a significant borrowing segment for private credit lenders. Despite the market turbulence affecting software stocks, Fitch recorded no defaults by issuers classified in the software sector last year. The agency said it assigns software issuers to their principal target market sectors where applicable.
Overall, Fitch's monitor highlights the intersection of borrower size, capital structure, and an extended period of high interest rates as central elements in the rising default rate among private credit borrowers. The report's dataset and categorizations reflect the agency's privately monitored ratings and the specific universe of 302 firms it tracks.