The default rate among private-credit borrowers has reached 2.3%, matching the highest level since the inception of the Kroll Bond Rating Agency (KBRA) DLD Direct Lending Index in December 2023, according to data released this week. The index tracks roughly 3,000 issuers in the $1.8 trillion private-credit market, highlighting rising stress in the sector as of Monday, June 15.
The KBRA index, which launched with a 2.3% default rate in late 2023, had not seen this level again until now. The trailing 12-month default rate climbed to this peak recently, reflecting increased financial strain among borrowers. KBRA projects the default rate will continue to rise, potentially reaching 3.5% by the end of 2026, which would correspond to about 111 issuers defaulting within the index’s coverage.
This rise in defaults signals growing challenges in the private-credit industry, which has expanded rapidly over the past few years. The $1.8 trillion sector provides an alternative to traditional bank lending but is now facing headwinds amid economic uncertainties. The current default rate matches the peak seen at the index’s launch, underscoring persistent credit risks in this market segment.
KBRA’s forecast of a 3.5% default rate by year-end 2026 will be closely monitored by investors and lenders involved in private credit. The index’s data provides a key benchmark for assessing credit quality and risk trends in this expanding asset class.