Fitch Ratings' rate, which counts interest deferrals and stressed maturity extensions, rose to a record for the 12 months through September. Bankruptcies, liquidations and out-of-court restructurings alone accounted for 0.3%.
Investors asking whether private credit is getting worse can now get two very different answers, depending on how they define a default.
Fitch Ratings said its U.S. private credit default rate rose to a record 6.3% for the 12 months through September, up from 6.0% in the second quarter and higher every quarter since the third quarter of 2025. It counted 27 default events and 20 new defaulting borrowers in the third quarter, and 91 events over 12 months.
Two days earlier, Proskauer's Private Credit Default Index put the third-quarter rate at 2.41%, down from 2.51% in the second quarter, across 746 loans totaling $205.7 billion.
What Fitch counts
Most of the gap is about definitions, not about which tracker is wrong; the two also cover different, partly undisclosed sets of loans. Fitch counts events that stop short of a borrower failing to pay. Half of its 12-month defaults were interest deferrals or new payment-in-kind arrangements, where a borrower pays interest with more debt instead of cash. Another 38% were stressed maturity extensions. Uncured payment defaults were 8%, and bankruptcies and liquidations 4%.
Counted only as bankruptcies, liquidations and out-of-court restructurings, Fitch's default rate was 0.3%.
Fitch's middle-market tracker also hit a record 5.7%. Industrial and consumer borrowers had the highest rates, at 9.7% each. Fitch cited high real interest rates and forecast that the Fed will raise rates to 4.25% in December.
Why the soft defaults matter
A borrower that switches to payment in kind has not failed. But its lender is booking interest income it has not received in cash, and the loan's value depends on the borrower eventually paying.
Individual funds show how the measure plays out. Fidelity's private credit fund, in its third-quarter tender, reported payment-in-kind income of 2.0% over 12 months, loans marked at 98.1% of par and no loans on non-accrual status. Investors asked to redeem 2.5% of shares, down from about 3%, and all requests were filled.
Stress or noise?
The stress reading: a record and rising default rate, driven by borrowers that cannot pay cash interest, with a rate hike still ahead.
The calmer reading: hard defaults remain rare at 0.3%, Proskauer's index is falling, and lenders are choosing to extend and amend rather than force losses.
What to watch
Fitch's October reading in mid-November, third-quarter results from business development companies in early November, and the Fed's December decision.