Fitch Ratings tracks US credit default rates. The rate is 5.7% for the 12 months to the end of February. The same January figure was 5.0%.
Borrowers who took on private credit debt when interest rates were low have faced much higher interest rates over the last few years – putting pressure on cash flows. For example for 2021-vintage deals, the federal funds rate when the company issued the debt was 0.25%.
The default statistics are based on data for approximately 1,200 issuers. This breaks down to 300 issuers for which Fitch provides private ratings, and 900 issuers for which Fitch provides credit opinions that feed into mid-market CLO ratings.
December 2024, January 2025 and February 2025 have each seen 8 defaults. This compares to an average of 4.7 defaults per month for 2024.
Healthcare had the highest number of defaults – 11 over the 12 months to the end of February. This is out of 150 healthcare issuers.
Consumer products also showed a high rate of defaults – 5 out of 65 issuers. So 7.6%.
Fitch’s data is based on the number of defaults and is not weighted by the amount of debt outstanding for each issuer.
The eight defaults in February were interest deferrals or conversions of cash interest to payment-in-kind.
The data is lumpy, but it seems to point to an increase in stressed situations in old-vintage private credit deals.
