US private credit defaults increase for third quarter in a row
The rate of private credit defaults in the US has risen for the third consecutive quarter, according to law firm Proskauer.
The firm’s latest Private Credit Default Index showed an overall default rate of 2.71 per cent in the second quarter of the year. The index covers 922 active senior-secured and unitranche loans worth approximately $150.7bn in total.
The default rate has increased from 1.6 per cent since the end of 2023. In the first quarter of 2024, the default rate was 1.84 per cent.
Read more: Fitch: US private credit defaults to rise in 2024
Companies with more than $50m (£38.7m) in core earnings recorded the largest increase in defaults, going up from 1.5 per cent in the first quarter to 2.8 per cent in the second quarter. For smaller companies, those with less than $25m in EBITDA, the rate increased from 1.9 per cent to 2.6 per cent, and mid-sized businesses saw their default rate go from two per cent to 2.7 per cent.
“It is clear that defaults are rising. However, the overall default rate for broadly syndicated loans remains considerably higher than those in private credit,” said Stephen A. Boyko, partner in Proskauer’s private credit group.
He added: “Defaults are not necessarily indicative of distress; instead they provide managers with the ability to take steps to reduce their risk.”
Read more: Borrower defaults could create attractive lending opportunities, says Pimco
Read more: Private credit defaults slow in 2024
