US corporate defaults on private debt climb to 5.5% in Q2, Fitch report says
&imwidth=600&imheight=450&format=webp&quality=medium "US corporate defaults on private debt climb to 5.5% in Q2, Fitch report says")
The Fitch Ratings logo is seen in this illustration. Photograph: (Reuters)
In Q2 2025, US corporate defaults on privately placed debt rose to 5.5%, up from 4.5% in Q1. Eight defaults were reported, with factors including maturity extensions and interest deferrals.
US corporate defaults on privately placed debt rose in the second quarter of 2025, signalling growing stress among smaller and mid-sized companies facing high borrowing costs. According to Fitch Ratings, as quoted by Reuters, the default rate among roughly 1,200 corporate borrowers of private credit reached 5.5 per cent in Q2, up from 4.5 per cent in the first quarter. The ratings agency reported that eight borrowers defaulted between April and June, compared with four in the previous quarter.
Stress factors driving defaults
Fitch’s analysis showed that four of the eight Q2 defaults came from maturity extensions by “financially stressed” companies. Three defaults stemmed from interest deferrals and the use of payment-in-kind (non-cash) repayments, while one default was due to an “uncured payment default.”
Lyle Margolis, head of private credit for corporates at Fitch Ratings, told Reuters that “smaller, private issuers remain particularly vulnerable to economic swings, GDP slowdowns, and persistent elevated interest rates, especially given their floating-rate structures.”
Drop in middle-market debt issuance
The second quarter also saw a 16 per cent drop in debt issuance in the US middle market, the group of mid-sized businesses that make up the bulk of private credit lending. As per Fitch data cited by Reuters, new middle-market debt volumes fell to $11.6 billion in Q2 from $13.7 billion a year earlier.
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Fitch noted that about 75 per cent of the private credit issuers it monitors belong to its rated middle-market collateralised loan obligation (CLO) portfolio, while the remaining 25 per cent are privately rated for insurance companies’ investment purposes.
Rising pressure from higher rates
The findings come against a backdrop of persistent high interest rates, which have pushed up financing costs for companies with floating-rate debt. Economists say that unless rates ease significantly or growth picks up, smaller corporate borrowers could face more repayment pressures in the coming quarters.
(With inputs from the agencies)