Fundamentals in Private Credit Showed Solid Earnings, Stubborn Leverage

Examining trends in borrower fundamentals helps investors monitor the health of private-credit portfolios and determine if credit risk — informed by leverage, borrowing capacity and earnings trends — is improving or deteriorating across the asset class.

Borrower credit profiles were supported in Q1 2026 by revenue and EBITDA growth. The median private-credit corporate borrower expanded their last-12-month EBITDA by 7.9% relative to Q1 2025 and revenue by 6.4%, according to a credit analysis using MSCI Private Asset and Deal Metrics data. EBITDA margins were steady at 19.1%. Growth in earnings matched that of revenue, suggesting that borrowers absorbed moderately high inflation without margin erosion.¹ An environment of moderate inflation can be a tailwind for revenues and profits if interest rates don’t also rise, making it easier for borrowers to repay fixed debt obligations.

Net leverage was steady overall in the first quarter of 2026 versus a year prior. Median net debt rose 9.7%, slightly outpacing EBITDA growth and leaving net leverage at 5.3x versus 5.1x a year ago. Examining the distribution of net leverage across borrowers shows more nuance: The share of borrowers carrying higher levels of net leverage (above 7.0x) ticked up to 31.4% from 29.6%, a modest shift but one worth monitoring. If EBITDA growth slows, the same debt loads could translate into materially higher leverage multiples and higher credit stress for the more aggressive end of the distribution. 

1 Year-over-year inflation in June was at 3.5% in the U.S. and 2.8% in the eurozone, according to the Bureau of Labor Statistics and Eurostat, respectively.