Private-Credit Defaults Match 2023 High in a KBRA Index

Private-credit defaults in the KBRA DLD Direct Lending Index have hit 2.3 percent, matching the highest since the gauge launched in December 2023, with KBRA projecting defaults to rise to 3.5 percent (around 111 issuers) by end-2026. By loan volume, defaults are expected to reach 7.6 billion dollars in 2026, up from 4.3 billion dollars in 2025, driven by elevated borrowing costs, sticky inflation post the US-Iran war, and AI-disruption risk in software lending. Recovery rates are also worsening, with unweighted implied recovery forecast to fall from 46 percent in 2025 to 36 percent in 2026, while BlackRock capped redemptions from its flagship private credit fund for a second straight quarter amid about 13 billion dollars in Q1 withdrawal requests.