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Private Credit Defaults Dip Slightly in Q2
31 Jul
Summary
- Overall private credit default rate decreased to 2.51% in Q2.
- Defaults declined for both large and small borrowers in Q2.
- Middle-sized borrowers experienced a slight increase in defaults.
The private credit market demonstrated resilience in the second quarter, with the overall default rate declining to 2.51% from 2.73% in the first quarter, as reported by Proskauer's Private Credit Index. This index tracks US senior secured and unitranche loans.
Defaults among larger borrowers, defined as those with EBITDA of $50 million or more, decreased to 2.4% in Q2 from 3% in Q1. Similarly, defaults among smaller borrowers (less than $25 million) fell to 1.9% from 2.3% in the previous quarter. However, a contrasting trend was observed for middle-sized borrowers, whose default rate edged up to 3.4% in Q2 from 3.1% in Q1.
Despite ongoing economic uncertainty, the decline in the overall default rate highlights the market's stability. Default rates across various industries continue to fluctuate but generally remain within recent quarterly norms. Notably, the software and technology sector maintained stable default rates.
