Private credit default rate rises to 6.3% in the 12 months through August

Summary

CNBC's Robert Frank reports that the U.S. private credit default rate reached a record 6.3% in the 12 months through August. He warns that an expected rate hike could pressure floating-rate direct-lending borrowers, and that maturity extensions under stress are masking underlying defaults. Software/tech borrowers are relatively stable, while health care, industrials, and manufacturing show more stress. He notes the defaults are notable because the broader economy remains strong and not in a credit cycle.

• U.S. private credit default rate hit a record 6.3% in the 12 months through August.
• Fitch data include stressed maturity extensions, which accounted for nearly half of default events.
• An expected Fed rate hike could raise interest expense for floating-rate direct-lending borrowers.
• Software/tech borrowers had the lowest default rate, below 1%.
• Health care had the largest number of defaults, driven by PE-backed roll-ups of practices.
• Industrials and manufacturing followed health care in default counts.
• Robert Frank says the rise is notable because the economy is strong and not in a credit cycle.
• The segment also mentions CNBC's Inside Alts newsletter for alternative investments coverage.