Houlihan Lokey flags 3% default rate and rising stress in small private credit
Resolved · credit · Occurred · Assessed · 1 sources
This assessment is dated 2026-09-12. Check what remains unresolved below before relying on it.
What changed relative to expectations?
Sub-par secondary loan trading and rising 3% default rates in lower-middle market private credit widen non-bank lending risk premia, tightening credit conditions for smaller corporate borrowers.
| Question | What the evidence establishes |
|---|---|
| What was reported? | Reported factHoulihan Lokey reported private credit stress concentrated in borrowers with under $100 million in EBITDA. |
| What else was confirmed? | Reported factSub-$100 million EBITDA borrowers experienced a 3% default rate by loan value. |
| Does the valuation support acting? | UnknownNo stored valuation assumptions for HLI yet — this is the next research task. |
| What would change the assessment? | UnknownDirect lending distress index readings — Monitor private debt loan markdowns and secondary market par distributions. |
What would this event cost your holdings?
Apply your own hypothetical returns to current holding values. The calculator does not infer security effects from this event.
Test this event against my holdingsReported facts
- · Houlihan Lokey reported private credit stress concentrated in borrowers with under $100 million in EBITDA.
- · Sub-$100 million EBITDA borrowers experienced a 3% default rate by loan value.
- · In the $10 million to $20 million EBITDA cohort, 12% of loans trade below 90% of par value, up from 1% in 2023.
- · Larger borrowers showed lower distress rates.
Public research record
Research framework · page evidenceCompleted event assessment
financial advisory restructuring demand pipeline
| Type | Claim | Scope |
|---|---|---|
| Assumption | Houlihan Lokey reported private credit stress concentrated in borrowers with under $100 million in EBITDA. | 2026-09-12 |
| Interpretation | financial advisory restructuring demand pipeline | HLI |
Countercase, invalidators, and sources
Distress remains quarantined in sub-$20M EBITDA firms without spilling into broadly syndicated markets.
- · Direct lending distress index readings — Monitor private debt loan markdowns and secondary market par distributions.
- HLI Flags Rising Stress Among Smaller Private-Credit Borrowers · 2026-09-11
What remains unresolved
- Base path
- Private credit direct lenders step up debt-for-equity restructurings for lower middle-market names.
- Adverse path
- Default wave widens into larger $100M+ EBITDA facilities, triggering credit fund redemption gates.
- Supportive path
- Distress remains quarantined in sub-$20M EBITDA firms without spilling into broadly syndicated markets.
- · Direct lending distress index readings — Monitor private debt loan markdowns and secondary market par distributions.this week
Evidence
- HLI Flags Rising Stress Among Smaller Private-Credit Borrowers2026-09-11
“Houlihan Lokey reports rising private credit stress concentrated among smaller borrowers, with sub-$100M EBITDA companies posting 3% default rates by loan value. The $10M-$20M EBITDA segment shows the most weakness, with 12% of loans trading below 90% of par versus 1% in 2023.”
Supports: Sub-$100M EBITDA companies posted 3% default rates; 12% of loans in $10M-$20M EBITDA segment trade below 90% of par versus 1% in 2023.