Defaults on private-credit loans hit their highest level in at least five years, a major stress test for the growing industry. Direct lending from private funds has become one of Wall Streetās favorite moves, and the high-interest loans offer hefty returns; the private market is worth about $2 trillion, up hugely from a decade ago.
But a Wall Street Journal analysis found that investor returns and loan health are down. Most defaults are in healthcare, but there are concerns this could spread to software, which makes up 20% of lending. Some worry a downturn in the US economy could pile pressure on the highly leveraged sector; ālosses could jump sharply if growth abates,ā the Journal warned.