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. Companies that sell junk debt are seeing similar improvements in credit quality. Defaults on liquid debt for U.S. speculative grade companies, at $5 billion in the first quarter, hit their lowest level since 2018, according to a Friday report from Moody’s Investors Service. The $975 billion global private credit market, where funds lend directly to companies that traditionally were small or mid-sized, is seeing a raft of larger transactions as money pours into funds. This year, companies including Calypso Technology Inc. and Bourne Leisure Holdings Ltd. have tapped private lenders for more than $2 billion in financing each for buyouts.
