MSCI Data Reveals 10% of Private Credit Loans Marked Down by Half as Borrower Stress Rises

MSCI Data Reveals 10% of Private Credit Loans Marked Down by Half as Borrower Stress Rises

According to a landmark report released by MSCI on May 12, 2026, private credit funds have marked down more than a tenth (10%) of their loans by at least 50%.¹ A loan valuation below 50% is a level typically associated with deep distress or an imminent risk of restructuring, indicating that corporate borrowers in the $3.5 trillion private credit market are buckling under the weight of sustained high interest rates.

The distress is particularly acute among smaller private debt funds, which do not have the scale or deep corporate relationships of the largest players. MSCI's data showed that 13% of loans in smaller private debt funds are now valued below 50 cents on the dollar.

The report also found that private debt funds' returns have plummeted, slumping to 1.8% in the fourth quarter of 2025 (the latest available data, reflecting the industry's characteristic reporting lag), down from 3.7% six months prior. This delayed reporting has driven investors to cash out of stock-market-traded BDCs, where they can obtain liquidity faster than in unlisted funds. Furthermore, a survey accompanying the report revealed that a third of private credit investors do not fully trust the private market data they receive, highlighting a persistent transparency gap.

This broad-based markdown data is reflected in recent fund-level write-downs. For example, Carlyle Secured Lending (CGBD) reported a 2.3% drop in its net asset value (NAV) per share in Q1 2026 due to unrealized losses in the software sector and widening credit spreads, while FS KKR Capital (FSK) saw its nonaccrual loans jump to 8.1% of its portfolio, as documented in FSK KKR Capital Takes $560M Loss as JPMorgan-Led Syndicate Cuts Credit Line.