Distressed loans in the US leveraged loan market total $131 billion as financially weaker borrowers face increasing maturities and fewer refinancing opportunities. PitchBook reported that the distressed loan total has almost doubled since the end of 2025. PitchBook put the total at the highest level in more than six years. The deterioration is increasing concern about defaults and creating difficulties for private credit lenders as troubled companies seek other financing.
Loans priced below 80 cents per dollar represented 8.3% of outstanding leveraged loans on October 23, versus 4.3% at the end of last year. Distressed loan volume last reached a comparable level in May 2020, at $134 billion after the pandemic-related market sell-off. The current pressure is concentrated among companies already experiencing financial problems. The current distress does not reflect a broad sell-off that also affects otherwise healthy businesses.
Borrowers with the lowest credit ratings face increasing difficulty refinancing through traditional lending markets. About 62% of distressed borrowers have ratings no higher than CCC-plus, versus 25% during the March 2020 sell-off. Loans rated CCC-plus and priced below 80 cents per dollar now total a record $53.7 billion. That amount exceeds the totals during both the pandemic and the Global Financial Crisis.
About $69.3 billion of distressed loans requires repayment or refinancing by the end of 2029, equivalent to 53% of the distressed loan total. Borrowers nearing maturity may have difficulty obtaining affordable replacement financing. PitchBook said no leveraged loan issued through September 30 to refinance existing debt had a CCC rating.
Private credit lenders offer an alternative for companies excluded from refinancing through broadly syndicated loan markets. However, the latest figures suggest private credit lenders are not financing every troubled borrower. LCD data cited by PitchBook show that 17 broadly syndicated loan borrowers moved into private credit through refinancing this year. The LCD data show that only four of those borrowers had CCC ratings before repayment. Another six borrowers had B-minus ratings.
Some companies have arranged amend-and-extend agreements with existing lenders to postpone repayment instead of obtaining entirely new financing. However, only 3% of borrowers completing amend-and-extend transactions had a CCC rating from at least one ratings agency. The concentration of distress among weaker borrowers could make the next credit-cycle phase harder for lenders. PitchBook warned that the distressed loan market indicates increasing default risk. PitchBook also warned that low average loan prices suggest lenders could recover less when borrowers default or restructure. More than half of distressed loans mature within three years, leaving borrowers and lenders less time to resolve financing needs before refinancing pressures grow.
Distressed Loans Near $131B as Private Credit Lenders Face Growing Borrower Risk
BenzingaShare
Summary
Distressed loans near $131B as private credit lenders face growing borrower risk appetite. As per FLASH AI, the US leveraged loan market reports $131 billion in distressed loans, with weaker borrowers facing maturities and fewer refinancing options. PitchBook noted the distressed loan total has nearly doubled since late 2025, hitting a six-year high. Loans below 80 cents per dollar now make up 8.3% of outstanding leveraged loans, up from 4.3% at year-end. About 62% of distressed borrowers have ratings no higher than CCC-plus, and $53.7 billion of these loans trade below 80 cents per dollar, a record. Around $69.3 billion of these loans face repayment or refinancing by 2029. Private credit lenders offer an alternative, but data shows they are not financing all distressed companies. Only 17 borrowers refinanced into private credit this year, with just four holding CCC ratings. Some firms used amend-and-extend deals, but only 3% had CCC ratings. Low average loan prices suggest lenders could face a resistance level during defaults or restructurings, as recovery rates may fall.
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