JPMorgan says $65 billion of US leveraged loans are deeply distressed at highest since pandemic

Summary

JPMorgan strategists said U.S. leveraged-loan deeply distressed debt rose from $40B to $65B, highest since March 2020, while total distressed loans below 80 cents hit $139.8B, up ~90% y/y, with tech at 39% and software maturities above $100B amid AI fears, higher yields, a more hawkish Fed, and CCC spreads above 1000bps Zhitong.

Impact Analysis

So basically the tell isn’t the headline $65B distressed-loan number; it’s where the pain is concentrated and how close it is to the 2020 peak. Loans below 60 cents rose from $40B to $65B, highest since March 2020, while all distressed loans under 80 cents hit $139.8B, up ~90% y/y and only $4B below the May 2020 high Zhitong. That’s not a random credit blip. Tech is 39% of the stress, led by CDK, QLIK, Quest, with >$100B of software maturities coming and AI fears crushing valuations Zhitong. I’d read this as a refinancing wall colliding with a business-model scare: rates, hawkish Fed, and CCC spreads above 1000bps are turning high-leverage software into the weak link Zhitong. The trade isn’t broad credit panic; it’s selective avoidance of low-quality software borrowers and hunting for names outside the distressed tail. Watch CCC spreads and the 80-cent distressed count—if they keep widening, the tail becomes a market event.