Credit quality across KBRA’s portfolio of rated direct lending transactions remains predominantly stable. However, defaults across the landscape of middle market (MM) leveraged borrowers—whose loans sit inside rated transactions—are starting to rise as expected (see Private Credit: Q4 2024 Middle Market Borrower Surveillance Compendium—5% at Risk). While the default rate among these borrowers currently remains low relative to the much higher rate observed in the broadly syndicated loan and corporate high-yield bond markets,1 we believe the gap will begin to close in 2026.
In this quarterly report, we provide data regarding the 2,287 unique global MM-sponsored borrowers assessed over the last 12 months (LTM) ended September 30, 2025. We examine key trends shaping credit quality by company size…