Private credit markets are showing signs of stress as Fitch reports the US default rate reached 6.3 per cent for the 12 months ending August 2026 - the highest in three years of tracking. The agency recorded 14 private credit default events in August alone, up from three in July. Unlike traditional lending, private credit defaults often involve restructuring negotiations rather than bankruptcy, with tools like amend-and-extend agreements and PIK toggles providing companies lifelines.

Randy Schwimmer at Churchill Asset Management notes that 'a default isn't the end of the story, it's often the start of negotiation,' adding that restructurings typically occur around conference tables rather than in court. Fitch monitors private debt performance through two portfolios: middle-market loans placed with insurance companies requiring ratings, and loans bundled into tradeable collateralised debt obligations, together covering over 1,650 borrowers.