In its monitor of 302 companies with outstanding private debt debt, Fitch recorded 38 defaults among 28 different borrowers. The 9.2% default rate in 2025 follows the previous record 8.1% rate of default in 2024.
Small issuers with revenues of $25 million or less made up the majority of defaults last year, which varied across sectors, according to the report.
The businesses tracked by Fitch were primarily composed of middle-market companies with earnings of $100 million or less and outstanding debt of approximately $500 million or less.
The defaults recorded by Fitch included both bankruptcy filings and distressed debt swaps, in which borrowers worked with their lenders to restructure loans.
Fitch’s findings come amid a market-wide selloff in software sector companies, a key borrower group for private debt lenders.
Yet Fitch recorded no defaults in the software sector last year. The rating agency said it classifies software issuers into their main target market segments, when applicable.
Most private credit loans were floating rate and tied to the federal funds rate, which has remained high over the past three years. Fitch described this as the catalyst for last year’s default.
“The capital structures in the PMR portfolio are predominantly floating rate with minimal interest rate hedges,” the report’s authors wrote, citing privately monitored ratings. “This makes companies’ cash flows extremely sensitive to higher rates.”
(Reporting by Matt Tracy in Washington; Editing by Cynthia Osterman)
by Matt Tracy
<a href