Private Credit Stress Concentrates in 2021-22 Deals
Borrowers face tighter covenants and higher spreads, while fund managers face scrutiny over valuations and liquidity.
Updated on Nov. 5, 2026 in Corporate Finance
The Alternative Credit Council reported that global private credit assets under management reached $4.1tn in 2025, up 17% year-on-year, and argued that negative investor sentiment has become disconnected from underlying market conditions. Operators in lending, fund management and borrowing should note the sector's scale and rising scrutiny over valuations and liquidity.
Why it matters
Signs of credit deterioration remain concentrated in specific sectors rather than spread across the wider market, while lenders are tightening terms, demanding stronger covenants and higher spreads, and in some cases refusing to extend maturities for vulnerable borrowers in response to potential AI-related risks. The pressure follows a period of elevated acquisition valuations supported by low interest rates in 2021 and 2022.
Global private credit assets under management reached $4.1tn in 2025, a 17% year-on-year increase. Roughly one-sixth of surveyed funds reported non-accrual rates above 5%, while the average share of loans subject to significant amendments declined to 10.6% from 11.7% in 2024.
The players
Alternative Credit Council
A trade body representing the alternative credit industry, which publishes research on private credit fund performance and market conditions.
Bloomberg
A global financial data and news organization whose coverage reaches institutional investors, lenders and fund managers worldwide.
The details
Significant amendments include payment holidays, maturity extensions, covenant changes and payment-in-kind interest arrangements, and their declining share suggests fewer loans were being restructured in 2025 than the prior year. Lenders have responded to potential AI-related risks by demanding stronger loan covenants and higher spreads, which raises borrowing costs for affected companies. About 70% of lender takeovers traced back to transactions completed in 2021 and 2022, the period when low rates supported elevated deal valuations.
Timeline
2021-2022: Low interest rates supported elevated acquisition valuations later linked to lender takeovers.
2024: Baseline year for the share of loans subject to significant amendments.
2025: Private credit assets under management reached $4.1tn.
Market Landscape
The current pressure traces back to the 2021-2022 low-rate acquisition cycle, when elevated valuations produced deals that now account for roughly 70% of lender takeovers. Private credit's 17% growth in 2025 shows the sector still expanding even as scrutiny over valuations and liquidity intensifies.
Borrowers facing tighter covenants, higher spreads and extension refusals should model higher financing costs and review refinancing options with qualified counsel or an accountant. Fund managers and lenders should watch valuation scrutiny and investor withdrawals at business development companies.
The takeaway
The operating signal is that deal terms set during the low-rate period are now producing stress, so lenders and borrowers should track the share of loans subject to significant amendments and non-accrual rates in their own portfolios. Review any upcoming debt maturities early and consult a qualified accountant before committing to new covenant or refinancing terms.
Further reading
For broader context on how these deal terms play out, see Corporate Finance coverage.
Source note: This article includes information reported by Private Equity Wire.
