TREE NEWS reports: Moody’s Ratings said US private credit borrowers are avoiding defaults by deferring interest payments and extending maturities, potentially masking the extent of credit stress. The default rate among private credit borrowers Moody’s assessed was 4% in the 12 months to June, but rises to 5.8% when payment-in-kind amendments and maturity extensions are included. Recent financial statements show 17% of borrowers are using payment-in-kind, which lets companies add interest to outstanding debt instead of paying cash.
Moody’s: US private credit stress masked by growing payment-in-kind use
AI take
The gap between headline and adjusted default rates is the real signal here: it suggests the private credit asset class may be carrying more latent stress than its reported numbers imply. That matters most for the lenders and fund investors exposed to these loans, and for anyone using private credit default rates as a proxy for broader credit health. Whether payment-in-kind usage keeps climbing, and whether those deferred obligations eventually convert into realized losses, is the open question worth tracking.
Generated by AI for reference only.
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