JPMorgan: Distressed Leveraged Loans Hit $139.8B, Highest Since 2020

JPMorgan strategists reported Tuesday that $139.8 billion in U.S. leveraged loans now trade at distressed levels, the highest total since the pandemic’s early months, with technology credits accounting for the largest share of the pressure.

Why it matters: Suppliers extending credit to software and tech borrowers should tighten monitoring now, before refinancing risk peaks in 2027.

Deeply distressed loans hit $65 billion, the most since March 2020

JPMorgan’s data tracks two measures of how far loans have fallen below face value, and both are climbing.

• $139.8 billion in leveraged loans trade at or below 80 cents on the dollar, an increase of nearly 90% over the past 12 months, according to JPMorgan strategists led by Nelson Jantzen.
• $65 billion in loans trade below 60 cents on the dollar, up from $40 billion a year earlier, the highest level since March 2020.
• 141 leveraged loan issuers now trade below 80 cents on the dollar, 35 more than a year ago.

Technology carries 39% of the distress

The pressure is heaviest in software credits already working through below-par debt exchanges.

• Technology accounts for 39% of distressed leveraged loan balances, or $54.4 billion, the largest sector concentration in JPMorgan’s data.
• CDK Global, the Brookfield Business Partners-backed auto dealership software provider carrying roughly $5.5 billion in debt, began negotiating a below-par debt exchange to cut interest costs in June.
• Quest Software, backed by Clearlake Capital, completed a second debt restructuring in August 2025 after its debt grew from $2.1 billion at its 2022 acquisition to more than $3.5 billion, following an S&P Global Ratings downgrade further into junk territory.

Defaults are climbing without a single bankruptcy filing

Liability management exercises, not formal bankruptcy filings, now account for most of the activity suppliers need to track.

• The dual-track default rate, which includes liability management exercises, stood at 4.37% by issuer count as of Aug. 31, more than three times the 1.36% payment-default rate tracked by the Morningstar LSTA US Leveraged Loan Index.
• Liability management exercises and distressed exchanges have made up 69% of default activity by count over the past 12 months, versus 31% for conventional payment defaults and bankruptcies.
• In a separate forecast, JPMorgan projects high-yield bond defaults will rise from 2.25% to 2.75% heading into 2027, with leveraged loan defaults climbing alongside them.

What to do now

Trade creditors holding receivables from software and tech vendors face a risk the headline default rate hides.

1. Pull current payment terms and outstanding balances for any software or technology-sector customer and flag names carrying B- or lower credit ratings.
2. Watch for below-par debt exchanges and liability management activity on a customer’s loans, a signal of distress that precedes most bankruptcy filings.
3. Tighten credit limits or request additional security on accounts showing covenant pressure or repeated repricing attempts.
4. Contact Securitas Global Risk Solutions to review your trade credit insurance coverage before a customer’s distress becomes a claim.

Disclaimer:
This blog post is meant to be informative and provide helpful tips and insights into credit insurance policies. It is not meant to supersede any policy requirements. Please consult your credit insurance policy for all requirements including claim filing deadlines and required documentation.

Since 2004, Securitas Global Risk Solutions, LLC has helped clients develop trade credit and political risk transfer solutions. As an independent brokerage, Securitas is focused on developing comprehensive solutions that meet client needs, ensuring a complete understanding of policy wording and delivering excellent responsive service. If you want to understand how trade credit insurance can protect your business, contact Securitas Global Risk Solutions to speak with a specialist.