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The US private credit market just posted its worst default numbers on record. Fitch Ratings reported that the trailing 12-month default rate for private debt borrowers reached 6.3% at the end of August, up from 6.1% in July and extending a streak of record-setting months that has defined 2026 so far.
The numbers behind the record
August saw 14 private credit default events, the highest monthly total since Fitch began tracking this data in 2024. Of those 14, 11 were unique borrowers while three were repeat defaults, meaning companies that had already stumbled once came back for an encore.
The trajectory throughout 2026 tells a clear story of deterioration. The default rate stood at 5.7% at the end of Q1, crept up to around 6% by April and May, and has now accelerated to 6.3%. Each data point has represented a new all-time high for the index.
Not all sectors are suffering equally. Healthcare providers and industrial/manufacturing companies posted the steepest 12-month default rates at 9.9% each. By contrast, software companies reported a default rate of just 0.6%. Companies with EBITDA of $25 million or less have consistently posted the highest default rates.
Why the pressure keeps building
Most private credit loans carry floating rates, meaning borrowers’ interest costs rise and fall with benchmark rates. Unlike larger corporate borrowers who can tap public bond markets or syndicated loan facilities to refinance at competitive rates, many private credit borrowers have limited options. Limited hedging strategies compound the problem, as smaller private credit borrowers frequently lack the sophistication or the capital to hedge effectively, leaving them fully exposed to rate movements.
Healthcare, one of the hardest-hit sectors, faces reimbursement pressures, labor cost inflation, and regulatory uncertainty that have squeezed margins for providers, particularly smaller regional operators.
What this means for the private credit boom
A 6.3% default rate complicates the private credit narrative considerably. The concentration of defaults among the smallest borrowers is particularly notable, and a 6.3% headline number likely understates the pain at the lower end of the market.
The gulf between software’s 0.6% default rate and healthcare’s 9.9% suggests that sector selection may matter more than ever in private credit. Managers with heavy exposure to healthcare and industrial borrowers face a fundamentally different risk profile than those concentrated in technology lending.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
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