Leveraged loan default rate falls in April; 6-month default predictor at 1.47%

The leveraged loan default rate by amount fell 10 bps to 1.34% in April, as no new defaults were recorded. Two issuers rolled off the legacy default list, and three dropped off the LME default tally. On an issuer count basis, the default rate fell 19 bps, to 1.24%.

As of April 30, the trailing 12-month metrics for the Morningstar LSTA US Leveraged Loan Index were as follows:

• Payment default rate by amount: 1.34%, versus 0.73% in April 2025
• Payment default rate by issuer count: 1.24%, versus 1.23% in April 2025
• Dual-track default rate by issuer count: 2.84%, down 154 bps year-over-year
• PitchBook LCD Default Predictor six-month estimate: 1.47%
  

LCD’s monthly default report features the legacy payment default rate and a dual-track default rate by count for index issuers conducting distressed liability management exercises (LMEs). More details and the methodology can be found here.

Over the past 12 months, 18 index issuers that conducted distressed LMEs contributed to the dual-track default rate, down 50% from 36 LMEs in the twelve months through April 2025.

PitchBook LCD’s newly launched Default Predictor estimates a six-month forward default rate of 1.47% by issuer count for legacy defaults. The regression model uses loan prices and credit ratings to estimate default risk within the Morningstar LSTA US Leveraged Loan Index.

Legacy payment defaults have remained relatively low, with the trailing 12-month issuer count ranging between 13 and 17 over the past year. By contrast, the trailing 12-month LME count peaked at 38 in late 2024 before tapering to 18 by April.

LMEs made up 56% of the trailing 12-month combined default count at the end of April, down from a 73% peak in July 2025.

Three names dropped off the LME default list, one from each of the top three sectors. As a result, Software and Healthcare lost share, while Chemicals rose to 10% from 9%.

Even with no leveraged loan defaults in April and only three in March, broader credit stress indicators remain elevated. The LLI distress ratio by amount (defined as the share of loans priced below 80 cents on the dollar) was 6.83% in April, down from 7.23% in March, and is the second-highest reading since December 2022’s 7.36%.

The rolling three-month ratio of loan facility downgrades to upgrades fell to 1.39x in April from 1.63x in March, the lowest reading since LCD began tracking this measure in late 2022.