US Private Credit Defaults Reach Record 9.2% in 2025: Fitch Ratings

Private Credit Defaults Rise to Record 9.2% in 2025, Fitch Reports

Fitch Ratings, a leading credit rating agency, has released a report detailing a record high in default rates among U.S. corporate borrowers of private credit in 2025. The report, released on March 6, indicates that the default rate rose to 9.2%, surpassing the previous record of 8.1% set in 2024.

The report notes that 38 defaults were recorded among 28 different borrowers in the Fitch Ratings Monitor, which tracks 302 companies with outstanding private credit debt. The majority of these defaults were from smaller issuers with $25 million or less in earnings, and were diversified across various sectors.

The businesses tracked by Fitch were primarily middle-market companies with $100 million or less in earnings and $500 million or less in outstanding debt. Defaults recorded by Fitch included both bankruptcy filings and distressed debt exchanges, where borrowers worked with lenders to restructure debt.

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The report highlights the impact of the market-wide sell-off in software sector companies, which are a major borrower group for private credit lenders. However, Fitch recorded no defaults in the software sector last year.

The rating agency attributes the high default rate to the high level of the federal funds rate over the past three years, which has left companies' cash flow vulnerable to elevated interest rates. Capital structures in the PMR portfolio tend to be predominantly floating rate, with minimal interest rate hedges in place, exacerbating the situation.