Defaults in the U.S. private credit market slid in the first quarter as the nation’s abating pandemic triggered a surge in economic growth, and investors hunting for yield grew more willing to finance struggling companies, Bloomberg News reported. The proportion of loans that defaulted or remained in default fell to 2.4%, according to a private credit market index from law firm Proskauer. That’s down from 3.6% in the fourth quarter and a peak of 8.1% in last year’s second quarter. The index tracks the performance of over 700 active senior secured and unitranche loans representing $131.1 billion in original principal. “The drop in the default rate this quarter from last quarter is consistent in what we’re seeing in our day-to-day,” Peter Antoszyk, co-head of Proskauer’s private credit restructuring group, said in an interview. “Deal activity is off the charts, and workout and restructuring activity has fallen off.” As millions of Americans get vaccinated daily, consumer spending is picking up, bringing a jump in sales to companies. Investors are pouring money into private equity and private credit funds, which is helping to sustain borrowers, Antoszyk said. Firms are also seeing a positive impact on businesses that were struggling “due to the efforts that were made by management, sponsors and the private credit community to support them,” he said.
