Private Credit Defaults Could Reach 5% Next Year, BofA Says (1)

Defaults in corporate private credit will exceed those in the syndicated loan market next year if interest rates remain higher for longer, Bank of America Corp. says.

Private debt defaults will reach 5% by early 2024 as portfolios see an estimated one-third of deals come due in the next two-and-a-half years, according to a new report from Bank of America credit strategists Neha Khoda and Dong Ba. That’s compared to an estimated 3% default rate for broadly-syndicated loans in the same environment, they said.

“Potential problematic situations within private debt remain unaddressed and are likely to surface near term,” ...