The stress number for private credit is about half the picture
Count the same borrowers across every lender and the troubled-loan share nearly doubles. The headline figure is the one that shows the least.
Three numbers to hold on to
Sources are linked on the last slide.
Private credit is lending that skips the bank
Investment firms raise money and lend it straight to mid-sized companies. A business development company, or BDC, is one way ordinary investors can own a slice.
These loans are not traded on a screen. So nobody can look up a price. The lender's own team decides what each loan is worth.
Fact: The firm that sets the value is usually paid fees based on those values. That is a built-in conflict, not an accusation.
BDC assets grew six times in eleven years
From $62B in 2013 to $375B in 2024. Funds that lend privately also grew, to $753B.
Source: Federal Reserve FEDS Note, May 2025 (Preqin, LSEG). 2024 is Q2.
Banks have committed $95B to these funds
About $56B is already drawn. The rest is credit waiting to be used. Broader counts that include private equity firms reach about $322B. Which number you see depends on who is counted.
Source: Federal Reserve FEDS Note, FR Y-14Q, Q4 2024.
Count borrowers across lenders and the problem doubles
A loan is "non-accrual" when the lender stops counting its interest as income. Octus found 1.9% reported. Counting any borrower that even one lender flags gives 3.74%.
Source: Octus, Q2 2026. Share of BDC debt at cost.
Two lenders can hold the same loan and report it differently
One marks it as troubled. The other keeps it as normal. Each report is allowed. Add them up and the sector looks calmer than the loans are.
Fact: Morningstar saw the same pattern a quarter earlier: $17.3B counted across lenders against $10.0B reported, Q1 2026.
Contested: The exact level. Octus and Morningstar use different methods and land on different totals. They agree on the direction.
of BDC loans now pay interest by adding to the debt
This is called payment in kind, or PIK. The borrower does not pay cash. The unpaid interest is added to what they owe. It can be a normal deal term. It can also hide a borrower that is struggling.
Source: Boston Fed, Early Warnings in Private Credit BDC Portfolios. April 2022 to early 2026.
What the filings leave out
- Fact: Each BDC reports its own loans. No standard public series joins them by borrower.
- Fact: No standard public series tracks when loans mature, how many were extended, or how many switched to PIK.
- Interpretation: That makes the reported rate a weak early warning. The people who set the marks gain from a calm number.
- Speculation: Next quarter's filings may show higher reported rates. Nothing here proves it.
Money is still trying to leave
- 5 OCTKKR's K-FITS fund got requests to withdraw 5.06% of shares, above its 5% cap, and paid all of them. Source
- LATE SEPSEC staff issued a reminder that private assets need careful valuation. Reported by two outlets; we have not read the statement itself.
- THIS WEEKTwo other reports, on loan refinancing and on loan marks, rest on one outlet each. We could not confirm them, so they are not used here.
The best argument against this
- The adjusted rate counts the whole loan for every lender, so it is an upper view, not a loss rate.
- Morningstar puts the cash income at risk at about 2% of total.
- Reported non-accruals fell 5% in Q2. K-FITS missed its cap by 0.06 points and paid in full.
- PIK is not always a warning sign. And the raw facts are public; what is missing is the joined-up view.
Three things that would settle it
- 13 Oct: The IMF's Global Financial Stability Report is dated for this day on the IMF site.
- Mid-November: Third-quarter BDC filings. Watch whether reported non-accruals move toward the adjusted figure.
- Any time: A loan-by-loan audit of 2021 and 2022 loans: coupon, PIK history, extensions, each lender's mark.
15 claims checked: 8 verified, 3 contested, 4 left off
Not found: a primary default-rate series; non-accrual and PIK series with 8 or more points; maturity and extension data; the IMF October report.
- Octus, Q2 2026 BDC non-accruals
- Morningstar, private credit distress
- Boston Fed, PIK usage
- Federal Reserve FEDS Note, bank lending to private credit
- Private Equity Wire, K-FITS
vizmaya desk · 9 Oct 2026