Rising Non-Accruals Signal Growing Risk in Private Credit Market
Private credit is facing increasing signs of borrower distress as non-accrual levels rise across the market. The latest data from LCD shows that reported non-accrual debt rose to 1.9% of total debt at cost in Q1 2026, up significantly from previous quarters and marking a turning point in the credit cycle after years of strong growth. Among the ten largest publicly traded Business Development Companies (BDCs), non-accrual exposure increased further during Q2 to 3.95% of total debt at cost, with adjusted exposure rising by 54 bps to 5.95%. The number of borrowers in distress has also grown steadily over the past three years, reaching 4.69% of all borrowers as of Q1 2026. The data suggests that credit risk is building across both large and smaller BDCs, with non-accrual debt exposure rising faster than overall portfolio growth. This trend could signal a broader shift in the private credit market toward tighter lending conditions or increased defaults.
Topics: BDC performance borrower distress non-accruals private credit risk