Quarterly Middle Market Credit Ratings Update: Downgrades Accelerate as Weak Borrowers Confront Challenges

Downgrades have accelerated for our private credit ratings on middle market borrowers, as shown by the rising ratio of downgrades to upgrades for the 12-month period ended April 15, 2025.

Key highlights from the commentary include the following:
-- The ratio of credit ratings or trends moving in a negative direction to those moving in a positive direction has stabilized at roughly 2:1.
-- Over the last 12 months, 2.7% of private middle market issuers have had their credit ratings downgraded to D (default), including three defaults so far this year.

"Downgrades are still largely driven by vulnerable borrowers in the B (low) or lower credit rating categories," notes Candice Gao, Assistant Vice President, Private Corporate Credit. "We expect further credit deterioration for this group should shifting tariff and trade policies add more pressure on borrowers' fundamentals."