U.S. private credit defaults reached a record 9.2% in 2025, according to Fitch Ratings, which tracked 302 companies with outstanding private debt. The rating agency recorded 38 defaults across 28 borrowers, surpassing the previous record of 8.1% set in 2024. Smaller issuers with $25 million or less in earnings comprised the majority of last year's defaults.

Fitch's findings highlight growing stress in middle-market companies, which made up most of the portfolio tracked by the agency. These businesses typically had $100 million or less in earnings and about $500 million or less in outstanding debt. The defaults included both bankruptcy filings and distressed debt exchanges where borrowers restructured with lenders.

Floating interest rates tied to the federal funds rate emerged as a key driver of the defaults, with companies having minimal interest rate hedges in place. Fitch noted that capital structures in the portfolio were predominantly floating rate, leaving companies' cash flow highly vulnerable to elevated rates that have persisted for three years. The rating agency found no defaults in the software sector despite a market-wide sell-off in that industry.