The default rate in U.S. private credit, as tracked by Fitch Ratings, reached a record high in the second quarter. Fitch recorded 32 private credit default events involving 20 new defaulters. This pushed the 12-month default rate to 6%, up from 5.7% in the prior quarter.

More than half of these default events were attributed to maturity extensions, rather than interest deferrals. The healthcare sector saw an increase in its default rate, while the industrials and manufacturing sector experienced the highest default rates among major sectors. In contrast, technology software demonstrated resilience with the lowest default rate at 1.2%.

Looking forward, Fitch anticipates a modest improvement in credit metrics within its privately monitored portfolio, with median leverage expected to decline slightly by 2027. While interest coverage is projected to improve due to anticipated EBITDA growth, the pace of this improvement may be tempered by delayed interest rate relief.