Q2 2024 Private Rating Actions Highlight Bifurcation Between Higher- and Lower-Risk Issuers

Morningstar DBRS published a commentary on second quarter 2024 private credit rating actions, covering new issue and surveillance activity across its rated private credit portfolio.

Key Highlights:
-- The group of the weakest issuers, those rated CCC (high) or lower, now represent 7.6% of the portfolio from 6% at year-end 2023.
-- Negative rating actions once again exceeded upgrades in Q2 2024, though the ratio remained level with Q1 2024.
-- Demand for new credit ratings remains robust and we are seeing an increase in credit quality for new issuers relative to the existing portfolio.

The report shows that private credit rating actions in the second quarter of 2024 indicate diverging trends between higher- and lower-quality issuers within our private credit portfolio. According to Anna Mosiyan, Assistant Vice President, Private Credit Ratings, "As we noted in our first quarter commentary, we continue to observe a growing bifurcation between the highest-risk credits and a subgroup of issuers where operating pressure has begun to recede."