Moody’s tracked 607 unrated borrowers, with 5.8% recording defaults or default-equivalent events; the report flags capital treatment and transparency risks as private credit grows in Asia-Pacific.

Moody’s Ratings has flagged rising stress in global private credit, with the default-equivalent rate among 607 unrated companies reaching 5.8% in the 12 months ended June 2026, including distressed exchanges such as payment-in-kind (PIK) amendments and maturity extensions. The findings come as private credit expands across regions and investment structures, raising questions over refinancing risks and insurers’ exposure to less transparent assets. The report said the trustee-reported default rate among the 607 borrowers, whose loans were held in 47 rated middle-market collateralised loan obligations (CLOs), stood at 4%. The rate increased to 5.8% when default-equivalent events were included. Advt

17% of borrowers used PIK interest Of the 607 companies tracked, 106, or 17%, used PIK interest, which allows borrowers to defer cash interest payments. Moody’s noted that these companies generally showed weak liquidity, negative free cash flow, high leverage and cash interest coverage below 1.0x. Business services, consumer services and software accounted for around half of default and PIK activity, the report said. 2027–29 maturities raise refinancing concerns Moody’s flagged loans from the 2020–22 vintages approaching maturity between 2027 and 2029 as a source of refinancing risk. More than half of maturities due in 2027–28 among Caa-equivalent issuers fall in that period, while around one-third of their maturities are due in 2029–30.

The report said weaker borrowers could face challenges refinancing their obligations, particularly as complex financing structures and limited transparency add to risks.

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