Distressed & Defaults

Distressed exchanges remain the dominant cause of default in 2026, at 27 of the 62 defaults YTD.

SLR’s Michael Gross says lenders may have to throw historic recovery data out the window.

The distress ratio, defined as the share of loans trading below 80 cents on the dollar, ticked up to 6.89% in July.

English restructuring plans are being embraced by US-linked debtors seeking alternatives.

The Proskauer Private Credit Default Index tracks US senior secured and unitranche loans, including 716 loans representing $195.6 billion in original principal amount.

Low default data belies a rising share of loans priced at distressed levels as distressed investors eye the potential for elevated restructurings down the road.

Respondents point to several areas of concern, with continuing geopolitical risks, private credit and the future of AI topping the list.

S&P said its new CCC- rating for the company reflects “potential for a default or [a] distressed exchange within six months.”

PitchBook LCD’s Default Predictor estimates a six-month forward default rate of 1.69% by issuer count on legacy defaults.

The filing comes on the heels of “unforeseen delays” in the closing of the company’s $23 billion sale of low-band and mid-band spectrum licenses to AT&T.

Last month’s tally was the highest since May 2025.

The PitchBook LCD six-month forward default projection is 1.86% by issuer count.

The company is in the midst of winding down its remaining assets and operations after a last-ditch effort to obtain a government bailout fell short.

Over the past 12 months, 18 Morningstar LSTA US Leveraged Loan 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.

The stakeholders have been trying to untie the Gordian knot of competing claims against First Brands’ assets.

The model currently estimates a 1.48% rolling-12-month default rate by issuer count for Sept. 30, 2026, or slightly above the 1.43% default rate as of March 31.

QVC made the disclosure after its net leverage ratio exceeded 4.5x, resulting in a breach of its credit facility’s financial covenant.

Distressed volume grew 25% in March alone even as average bid prices in the software sector edged modestly higher, signaling deteriorating support for stressed credits.