Houlihan Lokey sees stress among smallest private credit borrowers jump to 12% from 1% in 2023
HLI•Defaults and PIK usage
Defaults for borrowers under $100 million of EBITDA ran at 3% size-weighted, far above the 0.8% rate across the full market.
PIK usage stayed modest, with 11.8% of loans electing PIK; amended PIK represented 1.6% of interest dollars.
Stress rises among the smallest borrowers
Houlihan Lokey flagged a sharp rise in stress among the smallest private credit borrowers, with loans below 90% of par jumping since 2023.
For borrowers with $10 million-$20 million of EBITDA, sub-90% valuations rose to 12% from roughly 1% in 2023.
Pressure spreads to larger borrower cohort
Stress also spread to the $20 million-$100 million EBITDA cohort, with 6% of loans below 90% of par, a three-year high.
