Private credit is grinding through a rough patch in the cycle, featuring lower base rates, heavy reliance on PIK income, and an approaching maturity wall. The mood has darkened to match. For a second straight quarter, survey respondents named a negative perception of the asset class as its top challenge, ahead of credit stress. Second-quarter BDC filings are expected to show more quiet restructurings and exits of troubled positions.
The data backs up the unease. Stress is climbing both in borrower count and dollar exposure, with software names accounting for more than a quarter of companies under pressure. Of the roughly 5,000 companies held by BDCs at the end of March, 538, or 10.6%, showed signs of some degree of credit pressure, according to LCD’s analysis of more than 170 BDCs.
Key findings:
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The number of companies held by BDCs that showed some degree of credit pressure rose by 15% in the first quarter, to 538.
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Volume of first-lien TL and unitranche investments under pressure rose by 44% in the first quarter, to $35.4 billion.
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The software industry accounts for the largest share of borrowers under pressure, representing 26% of investments at fair value as of Q1 2026, up from 19% at the end of 2025.
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Most stressed borrowers are still paying cash. Out of the 538 companies on the watchlist at the end of March, half did not use payments-in-kind (PIK) in the last 12 months.
The full in-depth analysis, including methodology, detailed findings and an Excel data pack, are available to PitchBook subscribers at All News – Credit News. For information, contact support@pitchbook.com
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This article originally appeared on PitchBook News