• Loan valuations remain broadly healthy across the sector with stress concentrated in particular sectors or borrower types
• Private credit borrowers show improved company earnings and robust interest coverage ratios
• BDC rebound in Q2 suggests that Q1 sentiment may have overshot fundamentals.

London 16 September: The Alternative Credit Council (ACC) – the global representative of the private credit fund industry – has published its Q2 2026 Quarterly Market Update.

Drawing on Houlihan Lokey’s database of more than 80,000 loan valuations, the ACC Quarterly Market Update examines valuations, borrower earnings, debt servicing and portfolio performance. This edition includes a focus on BDCs and ACC analysis of what Q1 and Q2 data tells us about market sentiment and credit fundamentals during the first half of the year.

Key findings from the Q2 2026 ACC Quarterly Market Update include:

• Credit stress remains concentrated rather than market-wide. 85% of loans are valued above 97% of par, while the share of loans valued below 90% of par edged up from 5-7%. This cohort remains concentrated in identifiable sectors — particularly software — and among smaller borrowers
• Borrower earnings continue to improve. Median revenues rose 6.5% year-on-year, while median EBITDA increased 7.4%, extending the period of margin expansion observed since September 2023 by another quarter.
• Borrowers remain well placed to meet their interest payments. Median interest coverage stood at 1.72x, while amended PIK loan interest remained low at 1.6% of total interest dollars. However, the share of borrowers with interest coverage below 1.00x ticked up to 14.1%, an indicator that warrants continued attention.
• BDC fundamentals resilient despite challenging market sentiment. The Cliffwater Direct Lending Index returned 1.89% in Q2, with realised losses of 0.47% over the previous 12 months. Declines in BDC net asset values also moderated, while non-accruals among large private BDCs remained close to 1%.

The ACC’s Quarterly Update series will continue to track key credit indicators over time, with future editions providing regular analysis of valuation trends, borrower fundamentals and other emerging themes across private credit loan portfolios.

Jiří Król, Global Head of the Alternative Credit Council, said: “Q2 data shows private credit portfolio valuations are supported by continued borrower earnings growth and robust debt serviceability.  The recovery in publicly traded BDCs also suggests that the first-quarter sell-off went further than warranted by credit fundamentals. This is not an all-clear for the sector at large. Smaller borrowers and software remain areas to watch. For investors and policymakers, the priority is to distinguish those pockets of stress from broader portfolio performance. The ACC Quarterly Market Update provides the evidence to help make that assessment.”