> ## Content Index > Fetch the complete content index at: https://millionaire-insiders.ghost.io/llms.txt > Use this file to discover other available public pages before exploring further. # Private Credit's Bad Loans Jumped Forty Percent in a Quarter and Nobody Had to Announce It - URL: https://millionaire-insiders.ghost.io/private-credits-bad-loans-jumped-forty-percent-in-a-quarter-and-nobody-had-to-announce-it/ - Published: 2026-10-11T12:00:14.000Z - Updated: 2026-10-11T12:00:14.000Z - Author: Daniel Whitmore Business development companies, the listed vehicles through which most retail money reaches private credit, reported debt on nonaccrual status of $9.98 billion in the first quarter, up 40% from $7.12 billion three months earlier. Nonaccrual means the lender has stopped recognising interest income because it no longer expects to be paid. As a share of reported debt investments that is 2.01%, up from 1.45%. Adjust for the fact that several funds lend to the same borrowers and the figure rises to 3.24%. Over the same period the number of borrowers marked down by more than 15% went from 88 to 135. --- ***Sponsored by Brownstone Research*** [**"By August 31, Elon Musk's Prophecy Will Fulfill Itself"**](https://track.insiderclk.com/mcji/1C15721?ref=millionaire-insiders.ghost.io) [![](https://storage.ghost.io/c/e9/10/e9109ad9-55f9-4e96-a078-46af25115156/content/images/2026/10/Spad-4-M.A.G.I---Elons-Retirement-Window.jpg)](https://track.insiderclk.com/mcji/1C15721?ref=millionaire-insiders.ghost.io) The two investment legends who picked Nvidia 10 years ago are predicting that… By the end of this month, Elon Musk's new AI breakthrough they call "M.A.G.I…" Will collide with a strange market pattern with a flawless 100% track record of massive market gains. [**Click here to see the details**](https://track.insiderclk.com/mcji/1C15721?ref=millionaire-insiders.ghost.io) because the last time this happened… Everyday folks had a chance to turn $10,000 into as much as $350,000 in just about 12 months. --- ### Why this market is harder to read than the public one Private credit is direct lending to companies that would otherwise have issued high yield bonds or taken a syndicated loan. It has grown to somewhere between $1.5 trillion and $2 trillion, and the Financial Stability Board published a report in May setting out why that growth is difficult to monitor. The central problem is valuation. A high yield bond has a price, quoted continuously by people risking their own money. A private loan has a mark, produced by the manager that owns it, often supported by a private credit rating rather than a public one. In calm conditions the two converge. In stress they do not, and the board's language is precise about the consequence: valuation opacity can amplify strains rather than reveal them. The second problem is interconnection. Banks extend roughly $220 billion of credit lines to private credit funds by the official estimate, while commercial estimates run from $270 billion to $500 billion. A range that wide on a number that basic is itself the finding. ### The borrower profile is the point, not an accident **Whitmore's Watchlist:** **ARCC** (Ares Capital Corporation): The largest listed business development company, and the sector's reference point. **OBDC** (Blue Owl Capital Corporation): Another large direct lender, useful as a cross-check on the same borrower universe. **BIZD** (VanEck BDC Income ETF): The basket, for anyone who would rather not pick among them. Private credit borrowers typically carry lower credit quality and higher leverage than comparable public market borrowers. That is not a flaw in the model, it is the model: these are companies that could not get the financing elsewhere on those terms, and the lender is paid for that in spread. Most of these loans float. When the Federal Reserve raised its target range to 3.75% to 4% and projected 4.1% through 2027, every one of those borrowers saw its interest expense rise within a quarter. The nonaccrual numbers above are what that looks like arriving. Watch the payment in kind statistics alongside the defaults. In the first quarter, 32 borrowers representing $1.3 billion switched from paying cash interest to paying in kind, meaning the interest is added to the principal instead of being paid. A lender still books that as income. The borrower has stopped producing the cash. ### The liquidity question for anyone who owns it The listed funds trade on an exchange, so an investor who wants out sells at whatever price the market offers. The nontraded funds work differently: they offer periodic redemptions, usually capped near 5% of shares a quarter, and the cap is what protects the remaining investors when too many ask at once. That cap has already been tested. One large nontraded fund received redemption requests representing 17% of outstanding shares in the second quarter against a 5% limit. Nobody lost money in that transaction. What they lost was the ability to leave when they wanted to, which is the risk that an illiquid asset in a liquid wrapper always carried and that the quarterly statement never showed. None of this is a crisis forecast. Default rates are rising from a very low base, the asset class is earning double digit yields while it happens, and a 3% nonaccrual rate is ordinary for below investment grade lending across a cycle. The point is narrower. An asset that reports smooth returns is not the same as an asset with smooth returns, and the smoothness here comes from the valuation method rather than from the loans. **Whitmore's Take**: A 40% quarterly jump in nonaccruals is the private market catching up to a rate move the public market priced a year ago. Worth knowing whether the private credit you hold can be sold on the day you decide to sell it. ![](https://storage.ghost.io/c/e9/10/e9109ad9-55f9-4e96-a078-46af25115156/content/images/2026/10/private-credit-nonaccruals-2.jpg) --- more interesting content [Good, services, savings, stocks – repriced](https://track.insiderclk.com/wwji/1C95722?ref=millionaire-insiders.ghost.io) (Sponsored by Porter & Co.) [$118 → $56\. Robert's buying. 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All commentary is general in nature and is not directed at any individual investor.* --- *Written by Daniel Whitmore* *Millionaire Insiders*