By Matt Tracy
WASHINGTON, March 6 (Reuters) - The default rate among U.S. corporate borrowers of private credit rose to a record 9.2% in 2025, according to a report Friday by credit rating agency Fitch Ratings.
In its monitor of 302 companies with outstanding private credit debt, Fitch recorded 38 defaults among 28 different borrowers. The 9.2% default rate in 2025 follows a previous record 8.1% rate of defaults in 2024.
Smaller issuers with $25 million or less in earnings made up the majority of last year’s defaults, which were diversified among sectors, according to the report.
The businesses tracked by Fitch were composed primarily of middle-market companies with $100 million or less of earnings and about $500 million or less in outstanding debt.
Defaults recorded by Fitch included both bankruptcy filings and distressed debt exchanges, in which the borrowers worked with their lenders to restructure the debt.
Fitch’s findings come amid a market-wide sell-off in software sector companies, which are a major borrower group for private credit lenders.
Yet Fitch recorded no defaults in the software sector last year. The rating agency noted it categorizes software issuers into their main target market sectors when applicable.
Most of the private credit loans were floating rate and tied to the federal funds rate, which has persisted at a high level over the past three years. Fitch pointed to this as a catalyst for last year’s 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.”

FNCL

- Fitch Ratings reported a record 9.2% default rate among U.S. corporate private credit borrowers in 2025, up from 8.1% in 2024.  
- The increase was noted in 38 defaults across 28 different borrowers, mainly among small issuers with revenues below $25 million.  
- High floating interest rates, linked to federal funds, have been identified as a catalyst for last year's defaults, impacting companies' cash flows significantly.

US private credit defaults hit record 9.2% in 2025, Fitch says