Beyond the headlines: The current state of Private Debt

Newsletter Review | October 2025

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Private Debt fundamentals remain strong

Industry data continue to point to a healthy debt environment. Proskauer's Private Credit Default Index shows American default rates falling from 2.7% in Q4 2024 to 1.8% in Q2 2025. Among larger companies, defaults were just 0.5%, well below the 2020-2024 average of 1.7%.

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Earnings and deal activity indicate resilience

Private company earnings have proven robust despite a volatile macro backdrop. According to UBS, U.S. middle-market firms recorded 5.4% year-over-year earnings growth in Q2 2025, led by technology and healthcare sectors. 

Meanwhile, M&A activity has rebounded by 13% in value and 16% in deal count, creating new opportunities for lenders. With leverage levels broadly stable at~5x EBITDA and interest coverage ratios above 1.5x, the borrower base remains sound.

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Private Debt shows tight covenants in loan issuance

Top-tier fund managers tend to focus on first-lien, senior-secured structures with tight documentation, frequent reporting, and active borrower engagement.

A clear sign of investor protection and disciplined investing among leading Private Debt firms is that 70% of issuances in 2024 included strict covenants, compared with 10% in the public syndicated loan market.

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